Reporter: Charting a Future for Health Care in Rhode Island

The state’s health care exchange rolled out more smoothly than those in other states, but some business leaders are questioning the cost of maintaining it.

The trophies in the grocery business are few, but Dunns Corners Market, a specialty store with a loyal clientele, keeps one on the back wall. Mounted on a handsome wooden board, headlined “Living with the Giant,” the Providence Journal article chronicles the struggle of a food-world David with the Goliath of a Walmart across the street. In the story, owners Cheryl and Tony Spino fight the Westerly supercenter’s low prices with hand-cut meats, a cozy ambience and health insurance for their employees.

“It was a challenging time,” recalls Cheryl Spino.

Eleven years later, Dunns Corners Market has fought Walmart to a draw. On a bright Saturday morning, the store smells like fresh bread, the butcher’s case is arrayed with steaks and Spino greets her regulars by name. The employees still get health benefits, and that has become the source of the Spinos’ latest challenge. On the insurance market, small businesses are the Davids against the insurance carrier Goliaths; offering a health plan is costly.

So when HealthSource RI, the state benefits exchange, went live last October, the Spinos began to sift through the options. Nailing down affordable employee insurance consumed them every fall. But using the Patient Protection and Affordable Care Act — also known as the ACA or Obamacare — with its multitude of plans and premium levels and its website glitches, brought a level of frustration greater by several orders of magnitude.

“It was very, very difficult in the beginning,” she says. “I felt like the crash test dummy: Everything that could happen to us, happened.”

With fewer than fifty employees, Dunns Corners Market was not obligated under the ACA to provide coverage, but the federal government offers a generous tax credit to small businesses that do. The Spinos thought it was too much money to leave on the table and they liked the idea of employee choice.

By February, her staff was signed up, but the Spinos were coping with a provision in the federal law that changes their monthly payments, based on their shifting workforce demographics.
“It’s a learning curve for everybody, and parts of [the ACA] have to change,” she says. “But I believe in this law.”

While Republican congressmen and governors have tried to derail Obamacare with tactics ranging from the silly — fifty symbolic repeal votes — to the self-defeating (refusing to expand Medicaid), Rhode Island was an early adopter.

Created by Executive Order, Rhode Island was among the first to obtain federal grants to build its health care marketplace. Since 2012, the federal government has invested $111 million in building the state exchange. The rollout here was much smoother than states that relied on, the federal exchange, and the state has blown past its federal enrollment targets, says HealthSource RI Director Christine Ferguson.

In February, 110 small businesses were insuring their employees through the exchange. Another 45,226 Rhode Islanders became insured through the expansion of Medicaid and 17,000 residents had purchased plans on the individual market.

Rebecca Noon, thirty-four, and her husband, Jed Hancock-Brainerd, thirty-one, now pay $127 a month for health and dental insurance. Owners of a theater company, the pair had never been able to manage the premium, so they hoped for health and paid out of pocket. It once took Noon years to pay off a hospital bill from a head wound requiring stitches and X-rays.

“Obamacare came around at the exact right time,” says Noon. “It sounds funny to say, but it feels so good to pay our monthly insurance bill. It’s changed the way we live as artists.”
The Medicaid expansion aspect of the ACA was expected to bump up the state’s Medicaid budget conservatively from $85 million this year to $307 million next year.

“That is a major investment in Rhode Island’s health care economy that is serving the uninsured and funding providers to maintain quality,” says Health and Human Services Secretary Steven Costantino.
The federal Medicaid reimbursement remains at 100 percent; in 2020 the commitment drops permanently to 90 percent. But the state exchange will lose its federal lifeline in 2015, and the prospect of squeezing HealthSource RI into the state budget has touched off a debate about its future.

Should Rhode Island leave the insurance match-making to or use the platform the state has built over the last four years to push ahead and drive more comprehensive system-wide reform?
“Is it too expensive? If it’s just a website, there’s a case to be made. But I don’t think any of us who built it saw it in that limited way,” says Lieutenant Governor Elizabeth Roberts, who chairs the Rhode Island Healthcare Reform Commission. “What I think is too expensive is what we are purchasing. What is the value of that?”

In January, after Ferguson told the House Finance Committee that maintaining HealthSource RI could cost between $17 and $23 million annually, four business groups fired a warning shot. In a terse statement, the quartet announced that the exchange users should bear that cost, and that it would “strongly resist” any efforts to spread the burden more broadly.

“They are tired of all of the add-ons to health care costs,” says Al Charbonneau, executive director of the Rhode Island Business Group on Health. “The exchange has a couple of important functions: to make insurance available for individuals and make available the tax benefit for small businesses. We support a focused exchange that executes that mission in an efficient way.”

But the business community is hardly of one mind.

“I wished they had passed a single payer for the nation,” says Dan Shedd, president of Warren’s Taylor Box Company. “I don’t think business should be in the social welfare business. It should be in the business of making money, employing capital and workers.”

Another coalition representing business, labor, medical providers and consumers is backing legislation to transition the state into a single-purchaser system. HealthRIght envisions the state as a self-insurer, acting as one large group purchaser. Premiums, employer payroll taxes and federal dollars would be pooled in a health care trust fund. HealthSourceRI would act as the entry point for all insurance purchases.

“The exchange is a utility that will concentrate the flow of funds and create leverage to make real change in the delivery system,” explains Ted Almon, CEO of the Claflin Company and HealthRIght executive committee co-chair. “We aren’t focused on any one stakeholder. Everyone contributes to the cost problem.”

As monumental an accomplishment as the ACA was, many see it as just a first step. Ferguson is spending her spring laying out the options for HealthSource RI’s financial and operational future. The state could fund it through other federal grants, by consulting to those states now scrambling to set up their own exchanges or offering other paid services.

The exchange also has the potential to deliver substantial savings to the state’s $8 billion health care economy, by lending the state access to the health care pricing, claims and actuarial information that has been closely held by insurers.

“This debate is long overdue,” Ferguson says. “The exchange offers us the opportunity to look at all the options we have with this federal investment. We have this window where there are no clear winners and losers, and that is the best time to make change.”

In the meantime, the Spinos survived Walmart. Health care reform? They’re not so sure.

“I’m trying to stay positive,” says Cheryl Spino. “But this is definitely more of a challenge to the bottom line.”

Ellen Liberman is an award-winning journalist who has commented on politics and reported on government affairs for more than two decades.