Vermont senators debate how to measure hospital fiscal health as bill aims to let regulators cut Blue Cross rates

The Vermont Senate Health & Welfare Committee on April 29 heard expert testimony questioning whether days cash on hand is a reliable metric for determining hospital fiscal health and whether the Green Mountain Care Board or regulators should be authorized to reduce insurer reimbursements midyear.

Nancy Payne, a witness and health-care finance expert, told the committee that days cash on hand is highly volatile and “I think it's gonna be really unreliable, and you're not gonna be able to use it for the purpose” the bill appears to intend. Payne urged lawmakers to consider alternatives tied to payment mechanics rather than a single balance-sheet snapshot.

The bill under consideration, H.482, would give regulators authority to reduce Blue Cross reimbursement rates to certain hospitals if the insurer’s financial condition triggers statutory thresholds. Jen Harvey, legislative counsel, told the committee that the draft bill “would give the board the ability to reduce Blue Cross rates to a particular hospital,” and the question for lawmakers is which hospitals should be eligible.

Mary Black, director of insurance regulation at the Vermont Department of Financial Regulation (DFR), and staff representing Commissioner Kai Sampson told senators the department reviewed the Green Mountain Care Board memo and suggested several technical revisions. Black said proposals to replace a rate adjustment with a one-time lump sum “is a nonstarter from a perspective that it actually adversely affects capital,” and that tying reductions to claim-driven measures and risk-based capital (RBC) triggers is more practicable.

Witnesses outlined practical problems with using days cash on hand or unrestricted net assets as emergency triggers: cash balances fluctuate daily because of receivables, vendor payment timing, short-term borrowing, capital purchases and market valuation changes. Payne said “the day you look, it could just, you know, your day's cash could be a hundred” and urged lawmakers to consider payment-withhold or reserve mechanisms tied to insurer-provider payment flows instead of trying to extract cash after a crisis appears.

Payne proposed an example structure the committee discussed: pay hospitals a fixed share of expected amounts (for example, 85%) and hold the remainder as a reserve that Blue Cross could draw on if claims exceed projections. Payne argued that approach would avoid the need to measure a hospital’s intrayear cash position and reduce uncertainty for credit markets.

Committee members and DFR staff also discussed Risk-Based Capital (RBC) calculations and the NAIC-regulated multistate supervisory process that governs insurer solvency oversight. Black said regulators can require detailed claims information, examine contracts and run examinations on multiyear cycles; those processes inform mandatory and discretionary regulatory steps tied to RBC thresholds.

No formal vote was taken. Committee members asked Payne and DFR to provide written notes or a memo with suggested metrics and implementation options. The committee recessed with plans to return quickly to H.482 and a related proposal, S.266, and asked staff to distribute materials from the Green Mountain Care Board, DFR, and Blue Cross to senators for further review.

What remains unresolved are (1) which hospitals would be eligible for rate reductions, (2) what emergency trigger to use that is verifiable in real time, and (3) how to prevent insured funds or hospital cash from being shifted among affiliates to avoid a statutory trigger. The committee sought written recommendations and will continue deliberations after reviewing the materials and filed memos.