A Missed Opportunity

by Hamilton E. Davis

   When the Shumlin administration presents its single payer health reform plan to the legislature in January, it will do so without a key feature that could have significantly increased the plan’s political credibility: an agreement with Vermont Blue Cross to manage the delivery of care to most state residents.
   Such an agreement has been talked about for more than two years, but as the end of the planning period nears, no such agreement is in sight. There have been some informal discussions between Shumlin planners and Blue Cross, but the state never developed a proposal that could have led to something specific.
   They could certainly do so in the future; indeed, that is likely, but the negotiations would be complex and would take at least six months, well past the end of the 2015 legislative session. The political benefit, therefore, will be lost during the critical early days of legislative consideration of the Shumlin initiative.
   The potential value of a Blue Cross agreement as a component of the overall plan grows out of the botched rollout of the federally-financed insurance exchange, a failure that drained much of the political momentum from Shumlin’s effort. Reform opponents have charged that since Shumlin’s bureaucrats couldn’t handle the basic operation of the exchange, they couldn’t be relied upon to handle the far more challenging job of directing coverage of the whole state.
   The most effective reply to that claim would have been the assignment of the paperwork dimension of single payer to a proven performer like Blue Cross. The loss stings even more, given the increased toxicity of the political environment for reform recently, the hairs-breadth margin of the governor’s reelection last month, as well as the flap over Jonathan Gruber, the nationally known consultant to the Shumlin planners, who has made a series of disparaging comments about the passage of Obamacare.

Blue Cross on a Longer Reach

  While the administration has forgone the political benefit of having Blue Cross standing shoulder to shoulder with Shumlin planners in January, the long-term prospects for solving the management problem with the company are intriguingly good. Blue Cross, which could have been a dangerous reform opponent, actually sounds like a supporter.
  When asked about the issue Blue Cross President Don George issued the following statement:
   “Since Act 48 was approved, Blue Cross and Blue Shield of Vermont’s overriding focus has been to support the principles of reform and establish our company as a contributor to the state’s policy initiative. We continue our commitment to work with the administration and legislators to assure that all Vermonters have access to timely, affordable health care.”
   That apparently isn’t just rhetoric. Last winter, when problems with the exchange left many Vermonters wondering whether they had health care coverage Blue Cross stepped up and crafted programs to bridge the gap.
   Lawrence Miller, the Shumlin administration’s single payer chief, referred to that fact when asked about the status of contacts with Blue Cross. “The company has helped out in the past, and could be a suitable partner in the future,” Miller said. Still, Miller added, it is critical to go slowly because of potential difficulties with the flow of federal money. It would also be a good idea, he said, to see what the legislature has to say about the proposed plan before trying to solve the management problem.
  Most significant of all is the unique role that Blue Cross plays in the Vermont health care world.  To the outsider, Blue Cross is simply a Vermont-based insurance company, not that different from other carriers. The outsider would be wrong. Blue Cross is unusually well positioned to play a central role; it is already something pretty close to a single payer itself. Here’s how it is unique:
   Unlike other carriers, and unlike any private company, Blue Cross is a creature of the Vermont Legislature; it was established under Title 8 of the Vermont Statutes Annotated, which says the company must be maintained and operated solely for the benefit of the subscribers, that is to say, the people of Vermont. It can have no shareholders, it cannot make a profit, and it is exempt from all taxes. One of the intriguing possibilities, therefore, is that the ultimate owner of the Blues reserves of some $150 million or so may be the people of Vermont.
   The legal situation notwithstanding, Blue Cross has operated like any other private carrier much of the time. In 1983 the company mounted a counterattack against state regulation when the then-insurance commissioner ordered the company to take a series of actions to justify its request for a 30 percent rate increase. The increase flowed from very rapidly expanding hospital budgets and the commissioner wanted the Blues to show what they were doing to keep costs down.
   In its appeal to the Vermont Supreme Court, Blue Cross argued that it ought to be able to make the same kind of management decisions any other company might make. The commissioner’s orders were “an unlawful intrusion” into its decision making.
   In 1984, the Court slapped - Blue Cross down hard on that issue. Under Vermont law, the Court said:
   …Blue Cross is not a private business operating freely within the competitive marketplace; it is a quasi-public business subject to the regulation of the commissioner…A contrary holding would, we think, place the commissioner in an untenable position.  He would, on the one hand, be required to ensure that subscriber rates were not excessive, inadequate or unfairly discriminatory, and that benefits and services were being provided at minimum cost, and yet, on the other, not have the means actively to bring this about.
   I bring up this ancient history simply to demonstrate how closely aligned the interests of the state and Blue Cross are in their commitment to advancing the good of the state, without the involvement of business success and profits.
   That does not mean, however, that reaching a management agreement would necessarily be easy. If Blue Cross decided it did not want to get involved in Green Mountain Care, it could make several arguments. It could assert, for example, that maintaining its insurance standing could benefit subscribers who liked having the Blue Cross access card, especially when operating out of state.
   There also could be a problem with a provision in the federal Affordable Care Act that prohibits a firm that is managing the flow of federal funds from also selling an insurance product in the market place.
   Finally, it could appeal to the legislature to protect it from getting entangled in the Shumlin plan simply on the grounds that the program as it has operated so far is a tar baby that would endanger Vermonters’ health benefits.
   Nevertheless, as noted above, there is no evidence that Blue Cross wants to avoid a major health care reform effort. What it will take to get an agreement is a serious effort on the part of the Shumlinites to engage on the issue. That can’t be accomplished in the near term, but it remains very much on the agenda for the future.