Care Board bill would let state cut hospital rates and appoint observers to protect insurer solvency

Green Mountain Care Board Chair Owen Foster told a legislative committee on March 14 that a committee bill would let the board order reductions in reimbursement rates to specific Vermont hospitals and appoint an independent hospital observer if a domestic insurer faces an acute, immediate threat to solvency.

The bill’s backers say the authority is an emergency tool to protect the state’s two-carrier individual market and avoid a collapse that could leave tens of thousands of Vermonters without individual plans. Opponents — including hospital representatives — told the committee the proposal needs clearer triggers, stronger guardrails and greater detail on timing, how money would flow and how a hospital would be protected from unintended harm.

Foster, the Care Board chair, said Vermont’s health system is “at a true inflection point” and described the immediate risk as twofold: if a domestic insurer cannot pay claims or cannot remain in the qualified health plan (QHP) market, the remaining insurer could leave because it could not absorb the losses. Foster said that outcome could leave “70,000-plus Vermonters” without individual plans and would remove an option for small employers, federally qualified health centers and independent practices.

Foster outlined the bill’s proposed triggers and limits: a hospital would only be eligible for a rate reduction if it met both of the committee’s two named financial criteria (the committee discussed making the two criteria conjunctive): more than 125 days cash on hand and a positive operating margin in the prior fiscal year. Foster and Office of Legislative Council staff also described a network-level version of that test, where a hospital that is part of a consolidated network could be evaluated at the consolidated network level.

The bill ties activation of the authority to an insurer solvency trigger used in insurance regulation. Deputy Commissioner (unnamed) at the Department of Financial Regulation (DFR) warned the committee that Blue Cross Blue Shield of Vermont — the state’s sole domestic health insurer offering QHPs — is facing acute losses in the QHP market and reported an RBC (risk-based capital) ratio of about 213% that includes a $30 million surplus note taken at 8% interest. The deputy commissioner said that without the surplus note Blue Cross’s reserves would fall to about $28 million, which would be below the approximately 150% RBC threshold that triggers department-level control actions under Vermont insurance law.

Mike Fisher, acting for the Office of the Health Care Advocate, told the committee the advocate’s office supports the committee bill as an emergency tool. Fisher said regular oversight steps — actuarial review, challenges to insurer assumptions and usual rate-review tools — were not sufficient amid the extraordinary losses seen late last year, and that insurer solvency is now “fundamental” to consumer protection because insolvency could sharply harm access to care.

Hospital representatives said the proposal needs more specificity. Mr. Del Trecco, speaking for hospital interests, noted uncertainty about how much money would be shifted, how long a rate reduction would remain in force, how rapidly a hospital could seek corrective relief if the reduction themselves endangered hospital finances, and whether the 125-day cash-on-hand threshold is appropriate. He cited Kaiser Family Foundation guidance that defines “strong” cash levels as roughly 150–200 days for systems and similar ranges for standalone hospitals and asked the committee to consider adopting higher thresholds or alternative mechanisms such as loans, state support or contributions from insurers and systems.

The bill also includes a separate provision to allow the board to appoint an independent “observer” (a term the draft changed from “monitor”) if the board finds a material misrepresentation in information provided by a hospital. The observer would be authorized to obtain materials, report findings to the board and share information with the Office of the Health Care Advocate, while confidential or proprietary materials would remain restricted from further disclosure. The board could require a hospital to pay all or part of the observer’s costs, but committee members asked how costs would be handled if a hospital could not pay.

Office of Legislative Council staff said the draft before the committee is being circulated as committee bill 25-0975, draft 2.3, and that they had adjusted the bill language to reflect the committee’s intent: a statutory section authorizing temporary adjustment or reallocation of reimbursement rates to remediate an insurer solvency threat, and a second section authorizing appointment of an independent observer for credibility and information checks during budget review or enforcement.

Committee members asked Foster to propose a sunset timeframe; Foster said he would provide options but expressed a preference for no sunset because of what he described as the system’s ongoing instability. Several committee members and witnesses, including DFR and hospital representatives, emphasized that the authority is intended as an emergency, short-term tool rather than a long-term substitute for broader reforms to affordability and delivery-system stability.

No formal vote or motion on the bill was recorded during the session. Committee staff and witnesses discussed tweaking statutory references (a suggested change to reference 8 V.S.A. § 8304 for the RBC trigger) and adding clearer procedural timelines so hospitals could seek rapid corrective review if a rate reduction risked creating an acute financial harm.

Looking ahead, Foster and the Care Board said they are negotiating with the University of Vermont Medical Center and other systems on budget issues that, if resolved, could reduce the need to use the bill’s extraordinary authority. Several witnesses urged parallel work on system-wide fixes, loans or other mitigations so the tool would not have to be used.

Ending: Committee members asked for refinements to trigger language, clarification on payment for observers, and suggested exploring alternatives (loans, state or insurer contributions, or short-term appropriations) before broad adoption. If the committee advances the bill, witnesses asked for explicit timelines and procedural safeguards to limit harm to hospitals if the authority is invoked.