Shumlin: State Will Abandon Exchange If Problems Persist Through May

Mar 20, 2015

Vermont’s online health insurance exchange has been beset with problems since its launch a year and a half ago. In a surprise announcement on Friday, Gov. Peter Shumlin said Vermont will abandon Vermont Health Connect if it doesn’t start working properly soon.

Republican critics of Vermont Health Connect have been calling on the administration for months now to shelve the trouble-plagued exchange. Instead of throwing good money after bad at the state-run insurance marketplace, they said Vermont should just use the federal version of the website – as 36 other states have done.

Until Friday morning, Peter Shumlin had been generally dismissive of the concept. But he now says that if the exchange doesn’t meet two key milestones this year, then the state will begin the transition to a federally operated version.

“We expect it to work. We think it will work,” Shumlin said. “But we also think it’s fair that people understand what we would do if it didn’t.”

So why is the governor making this announcement now? Shumlin says Vermonters deserve an answer to a question he’s been getting from lawmakers in Montpelier, and Vermonters across the state.

“What happens, governor, if all of your expectations that it works don’t get delivered – what’s your plan?” Shumlin said.

Shumlin’s contingency plan would see the state adopt one of two options. The first is a federally supported state exchange, where Vermont could tailor its own exchange framework, but the feds would take care of all the IT work – Oregon and Nevada have used this approach.

If that idea isn’t feasible, then Shumlin says the state would simply use the same healthcare.gov site now used by 36 states.

Even if Vermont does move to a federal exchange though, Shumlin says it wouldn’t mean the end of Vermont Health Connect, since Vermont will still need that system to serve as the IT infrastructure for government-subsidized health care programs.

“We’ve still got to have this website work for the over 100,000 Vermonters who currently are getting Medicaid,” Shumlin said.

That means that even if Vermont does move to a federally run exchange, it’s not likely to save any money by dropping the exchange. Not only would the state spend the $200 million Vermont Health Connect is projected to cost, according to Chief of Health Care Reform, Lawrence Miller, it would also have to pay additional transition costs associated with moving to a federal version.

Vermont Health Connect is being paid for almost entirely with federal money.

“This is not an attractive option,” Miller said of going to a federal exchange. “Taking that path would undoubtedly increase costs.”

Dorset Rep. Patti Komline, a Republican, was among the many Republicans who have been calling on the administration to move to a federal version of the exchange.

Under Shumlin’s contingency plan, the transition to a federal site wouldn’t happen until 2017. But Komline says that if problems on the exchange aren’t solved this year, then it makes no sense to wait until 2017 to make the jump.

“I’m a little disappointed that he’s pushed it back until 2017. I think Vermonters are aware that this doesn’t work, that what we’ve been doing doesn’t work, and that we need to go down a different path,” Komline said.

Shumlin said the fate of the state-run exchange hinges on two key milestones, the first of which arrives at the end of May, and centers on the change-of-circumstance functionality that has thus far eluded technology contractors.

If the site can’t automatically process change of circumstances by the end of May – things like changes in consumers’ addresses, or the number of people on a health plan – then Shumlin says the state will consider moving to a federal exchange.

The second milestone involves the site’s ability to automatically enroll customers. If that function isn’t in place by October – the beginning of the next open enrolment period – then Shumlin says the state will ditch the state-run exchange.

The May change-of-circumstance deadline is in reality quite soft. If that deadline comes and goes without success, then Shumlin said the state will continue working with its tech vendor to rectify the change-of-circumstance problems. And since the governor won’t present a plan for moving to the federal exchange until November, under Shumlin’s contingency proposal, then in reality the administration has many months to resolve the change-of-circumstance issues before they would threaten the continued existence of Vermont Health Connect.

Shumlin is asking lawmakers to include his contingency plan in legislation.

Shumlin said he has a high degree of confidence in the state’s new technology vendor, a firm called Optum, to complete the work by the new deadlines. Optum replaced the prior vendor, CGI, and has, according to Shumlin and Miller, delivered ahead of schedule on all of its promises thus far.

Vermont had spent about $127 million on the exchange through December, not including operating costs.

Update 11:52 a.m. John Campbell, president pro tempore of the Senate, also released a statement in support of the governor's contingency plan, emphasizing that the Senate has long called for a clear time-frame for the exchange's functionality. "However, my support for this plan should not be viewed as an endorsement of the increasing operating costs of the exchange," Campbell said. "The Senate will continue to closely monitor the cost and functionality of the exchange as the session progresses.”

Update 11:11 a.m. In a statement, House Speaker Shap Smith said he is "encouraged" by the Shumlin administration's announcement, and noted that the House "has repeatedly stressed the need for a contingency plan that addresses Vermonters’ concerns about the exchange’s troubled rollout and upkeep."

"It is unfortunate that the troubles of Vermont Health Connect have overshadowed the fact that this reform has increased the number of insured Vermonters," Smith continued. "It is imperative that we have a fully functioning web portal so we can focus on the critically important issue of bringing down health care costs and improving public health outcomes. As we proceed with the next phases to repair the exchange, I expect the House Health Care Committee will make a thorough review of the proposal.”

Original post 11:01 a.m. Shumlin says he's confident the state will achieve the benchmarks, but he says it's time to install a contingency plan. 

“Since coming on board last fall, Optum has successfully delivered on every task we have given them,” said Chief of Health Care Reform Lawrence Miller of the state's technology partner in a statement released by the governor's office Friday morning. “We expect them to continue to improve service and meet the specified deadlines. But we recognize – and Optum and our insurance carriers agree – that the state must continue to have in place operational plans so that, with or without new technology, Vermont  Health Connect customers will have a far smoother 2016 renewal experience than they did this year.”

This afternoon, Miller will present the administration’s proposal to pass legislation this session to require the state to investigate and pursue alternatives to Vermont Health Connect if "key milestones" aren't met.

VPR will be updating this story as more information becomes available.