Health Care Advocate: end of ARPA subsidies would hit individual market; keep small‑group market separate

The Health Care Advocate told meeting participants that the likely end of enhanced premium tax credits under the American Rescue Plan Act would sharply raise costs for people in the individual insurance market and that, given current market dynamics, Vermont should keep the small‑group market separate from the individual market.

The advocate said the markets were combined in 2013 under the principle that “a larger pool is a stronger pool, is a more stable pool, is a less volatile pool,” but that later federal changes — especially ARPA’s enhanced premium tax credits — materially changed the tradeoffs. The advocate said ARPA both extended subsidies above 400 percent of the federal poverty level and increased subsidies for people under 400 percent, and that losing those enhanced subsidies would be “a disastrous cliff.”

The office argued the enhanced credits protected many individual‑market enrollees and made it sensible to separate the markets so employers in the small‑group market would not carry the premium impacts introduced by changes in the individual market. The advocate said the enhanced subsidies were based on the benchmark (silver) plan, and that changes to the silver benchmark — including so‑called “silver loading” and re‑rating of silver plans to reflect cost‑sharing reductions — increased federal premium dollars available to individual enrollees.

The Health Care Advocate explained technical points to the committee: modified adjusted gross income (MAGI) determines subsidy eligibility, there are limited ways (for example, IRA contributions) to reduce MAGI to preserve eligibility, and that the more generous ARPA rules meant many individual enrollees paid little or nothing regardless of how high benchmark premiums rose. The advocate added that silver loading increased buying power in the individual market and that Green Mountain Care Board actuarial estimates put the strategy’s value in the tens of millions of dollars.

The advocate cited earlier estimated impacts: at one point consolidating the pools had saved the small‑group market roughly $17,000,000 (the advocate noted current figures being cited as $23,000,000 and said she would follow up to reconcile the difference). The advocate also referenced a previously cited $65,000,000 of increased federal subsidy attributable to the enhanced ARPA subsidies and said a family of four with all four members qualifying could lose “as much as $20,000” in premium tax credits if enhanced subsidies end.

“I object to the concept that the small group is paying for the individual group,” the Health Care Advocate said, arguing repeatedly that insurance is about spreading risk and that separating the markets now is a pragmatic response to current federal subsidy rules. On the likely trajectory of federal policy, the advocate said her reading of federal politics made it “very unlikely” that the enhanced subsidies would continue but acknowledged uncertainty: “They, of course, could.”

Committee members asked clarifying questions during the presentation. One member, identified in the record as Ori, sought to separate the two issues and confirmed that keeping markets unmerged would not, on its own, replace possible lost federal subsidies. The advocate agreed and emphasized that the two matters are distinct: market structure versus federal subsidy levels.

The advocate said staff would provide more formal testimony later in the day and offered to return for further questions and follow‑up data, including the marketplace report charting premium tax credit levels under ARPA versus the Affordable Care Act.

Why it matters: Loss of enhanced premium tax credits would shift premium and out‑of‑pocket burdens onto individual enrollees, could create steep eligibility “cliffs” at 400 percent of the federal poverty level, and would alter the relative costs between individual and employer‑sponsored small‑group coverage. The Health Care Advocate urged the committee to treat market structure decisions and federal subsidy uncertainty as separate but related risks.

The Health Care Advocate said she would testify later in the day and that her office would provide follow‑up clarifications on the dollar figures and the marketplace report cited in the presentation.