Lawmakers, advocates and insurers debate reference‑based pricing, CON thresholds and drug costs as drivers of Vermont’s expensive health care

Stakeholders testifying to the Vermont House Committee on Health Care aired competing policy ideas to address why Vermont has among the highest health care costs in the country: reference‑based pricing, changes to certificate‑of‑need rules, stronger transparency on outpatient drug pricing and attention to market structure that is shifting risk out of state‑regulated markets.

"Reference‑based pricing could help rationalize prices across providers, but you wouldn't want to do it just for one payer or overnight," said Sarah Teachout, director of government and media relations for Blue Cross and Blue Shield of Vermont. Teachout told the committee Blue Cross supports the concept in principle but urged phased implementation and broad application across payers to avoid unintended cost shifting that could jeopardize hospital budgets.

Mike Fisher, the state's Health Care Advocate, urged legislative action to develop a theory for how Vermont will pay for the health care system it wants. Fisher suggested raising the threshold for certificate‑of‑need (CON) review to encourage more competition in some areas, while warning that CON reform requires nuance to avoid enabling bad actors or destabilizing necessary local services.

"If we keep doing the same thing without intervention, we're going to see hospitals close," Fisher said, referencing the 2024 Act 167 report and the committee discussion that followed. He urged a planful approach to avoid market‑driven closures and to protect rural access.

MVP Health Care representative Jordan Estes described market dynamics that complicate policy design: a steady shift of covered lives out of fully insured state markets into self‑funded and multi‑state arrangements has reduced enrollment in Vermont’s state‑regulated pools and increased volatility and cost pressure in the remaining markets. Estes said about 72,000 Vermonters are in state‑regulated individual and small‑group markets and MVP holds roughly 38–40% of that market slice.

Estes and other witnesses also flagged drug pricing and the interaction of federal programs with commercial markets. Estes noted a provision in Vermont’s PBM (pharmacy benefit manager) law that, in his view, prevents carriers from tracking on claims when a 340B‑covered drug is used, limiting insurers' visibility into outpatient drug acquisition costs and complicating pricing analysis.

Lawmakers and witnesses also discussed the recent strategy known as "silver loading," which some presenters said increased federal subsidy purchasing power for lower‑income Vermonters. One presenter cited an estimate that silver loading delivered roughly $40 million in additional buying power for individual market consumers in the prior year.

Positions and cautions offered during the hearing:

- Reference‑based pricing: advocated as a tool to reduce price variation, with carriers and advocates recommending phased, system‑wide adoption rather than narrow application to a single payer. Carriers warned of hospital budget pressure and possible cost shifting if a lower reference price is used only for a subset of payers.

- Certificate of Need (CON): some witnesses urged raising the dollar threshold for CON review to spur lower‑cost providers and freestanding centers; others warned to preserve review for high‑cost capital projects and to protect service quality and placement in rural areas.

- Pharmaceuticals and 340B: speakers urged better tracking and transparency for outpatient drug spending, noting federal influence on prices and limits to state authority over manufacturer prices.

- Market structure: MVP and others warned that as employers move to self‑funded or multi‑state arrangements, the state‑regulated market pool shrinks and concentrates higher‑cost lives, increasing volatility and upward pressure on premiums for the remaining enrollees.

No formal votes were taken. Several bills were referenced as pending or expected this session: legislation to keep the individual and small‑group markets unmerged (support cited by Blue Cross and MVP), and an Act 111 cleanup bill (H.31) to adjust implementation details. Committee members asked for further briefings, including an education session on pharmacy benefit managers (PBMs) and more data on price variation across facility types.

What’s next: Committee members said they will continue to evaluate proposals as they receive the governor’s budget materials and additional data briefings. Witnesses and lawmakers signaled broad agreement that any major payment or pricing reform will require phased implementation and careful attention to impacts on hospital finances, employer markets and rural access.