Blue Cross and Blue Shield of Vermont warns Senate committee it paid $1.5 billion in 2023 claims and faces reserve shortfall

SARAH KUCHOW, director of government and media relations for Blue Cross and Blue Shield of Vermont, told the Vermont Senate Health & Welfare Committee on Jan. 24 that the insurer paid $1.5 billion in claims in 2023 and is drawing on reserves to cover persistent losses.

Kuchow said the company paid about $25.5 million in state and federal taxes and fees in 2023 and that administrative expenses represented about 6.2% of spending. “For every dollar we collected in premiums, we paid out a dollar 11,” she said, describing a payout ratio the company calls unsustainable.

The company discussed multiple drivers of higher costs, including rising hospital prices, growth in utilization, and expensive specialty pharmaceuticals such as GLP‑1 drugs. Kuchow said Vermont’s hospital prices rank among the highest in the country and that some high-cost infused medicines administered in hospitals are major cost drivers.

Kuchow described recent steps Blue Cross and Blue Shield of Vermont has taken to address solvency: requesting a larger margin from regulators (the company sought a 7% margin from the Green Mountain Care Board last summer, up from a typical 3% request), cutting administrative expenses, borrowing funds from its parent company Blue Cross and Blue Shield of Michigan, and pursuing technology and back‑office efficiencies through that affiliation.

She said the insurer became a subsidiary of Blue Cross and Blue Shield of Michigan last year to gain economies of scale for systems such as NASCO and for pharmacy benefit management, noting the merged contracts give the Vermont company access to better pharmacy pricing via OptumRx. Kuchow said Vermont remains run as a financially separate organization and that its Vermont reserves remain in Vermont.

On regulatory capital, Kuchow told the committee the insurer’s risk‑based capital (RBC) level at the end of last year was reported to be "3 37%" in the hearing; she said the Department of Financial Regulation expects RBC in a higher range — “between 590 and 670,” she said — and that the company will report finalized year‑end RBC figures in its March filing once four quarters of claims are fully processed.

Kuchow described changes in pharmacy distribution and rebates after recently enacted pharmacy benefit manager (PBM) laws, saying implementation of those reforms is not yet complete and has contributed to higher drug costs for members where rebates were lost when drugs shifted to hospital channels. She offered to return for committee testimony when bill 3.40b (referenced in the hearing) is considered.

On primary care, Kuchow said Blue Cross reinvested funds previously allocated to OneCare Vermont into its own primary care program (referred to in the hearing as ECPC), which pays bonuses to practices that meet goals and aligns reporting with the Blueprint program. She said the insurer pays into the Blueprint only for fully insured members (Affordable Care Act marketplace customers and large fully insured groups), and a small number of self‑insured groups participate voluntarily.

Kuchow also described clinical and network steps taken on mental health and infusion care: the insurer has reduced prior authorization for in‑network, in‑state mental health services and is piloting a home infusion program, which she said can sharply lower costs compared with hospital infusion (an example offered in the hearing compared roughly $6,000 in a hospital versus $14 at home for an infusion episode).

Committee members asked about enrollment impacts after the insurer requested a larger premium margin; Kuchow said she had not seen major enrollment losses to date. She also said Vermont membership is small relative to Michigan (the company cited about 228,000 members) and that about 400 employees are based in Berlin, Vt.

Committee discussion at the hearing touched on topics the committee said it will continue to study: hospital global budgets, electronic medical records, pharmacy benefit management reform, and possible committee bill language on health system cost and payment changes. Kuchow and committee members agreed to follow up with more detailed testimony, including from the insurer’s clinical and actuarial staff.

The session was informational; no votes or formal actions were taken on the record during this presentation.