Committee hears testimony on H.35 to permanently unmerge individual and small-group insurance markets

Legislative counsel, regulators and stakeholder witnesses described H.35, a bill that would permanently unmerge Vermont’s individual and small-group health insurance markets, during a Senate Finance Committee hearing.

“As the chair said, this is H.35. This is an act relating to unmerging the individual and small group health insurance markets,” Jen Carter of the Office of Legislative Counsel told the committee, outlining statutory cleanups and the substantive change: separating community rating and guaranteed-issue rules between the two markets and setting an effective date of Jan. 1, 2026.

Carter explained the bill removes obsolete pre-2016 language, clarifies how carriers may offer direct enrollment, and inserts separate guaranteed-issue provisions requiring carriers to accept all individuals in the individual market and all small employers and their employees in the small-group market. The bill also specifies that a carrier’s community rating for individual-market premiums will be determined separately from its small-group premiums.

Witnesses emphasized timing and market effects. Emily Brown of the Department of Financial Regulation said, “The department supports H.35, which would permanently unmerge the individual and small group marketing, and we believe that this would be beneficial for stabilizing… small groups and individuals.” She added she did not have data on outcomes if enhanced federal subsidies expire.

A representative from the health-care advocacy community (name not specified in the transcript) told the panel their group supports permanent unmerging, saying failure to pass the bill could raise premiums for small employers while the individual market has tools — including federal subsidies and the so-called silver-loading strategy — to address affordability. Blue Cross’s Sarah Teachout also backed the bill, telling the committee insurers are already preparing 2026 plan filings and prefer clarity: without the change insurers would face combined scenarios for merged/unmerged markets and with/without federal subsidies.

Committee members asked technical questions about community rating and the practical differences between individual and small-group purchasers. Carter and witnesses explained the individual market typically includes people whose employers do not offer coverage; small-group purchasers are employees of firms that offer fully insured plans. Brown and witnesses noted that the individual market currently tends to have higher claim experience and that federal premium tax credits apply to individuals but generally not to small-group purchasers.

The hearing record noted the enhanced federal premium tax credits enacted during the pandemic are scheduled to expire at the end of the calendar year unless Congress acts; witnesses told senators that uncertainty increases the importance of a clear statutory framework. Committee members and witnesses also referenced a DFR analysis (the committee was told the DFR/actuary report is available on the department’s reports page) and asked staff to circulate it.

No formal committee vote was recorded during the session; staff said the bill is time sensitive because insurers are already designing plans and developing rates for the 2026 plan year and need statutory clarity.

The committee scheduled further consideration and indicated it would invite additional technical witnesses and circulate actuarial analyses ahead of any action.