Senate committee hears high-level 'Health Insurance 101' on private market, risk pooling and rate review

Nolan, Joint Fiscal Office staff, gave the Senate Health and Welfare Committee a high-level briefing on private health insurance markets on Jan. 21, outlining where state authority applies and which parts of the market are largely outside state control.

The presentation aimed to define basic concepts committee members will see in bills and testimony: market segments (self-insured, large group, small group, individual), actuarial value and metal tiers, how HSAs and HRAs affect out-of-pocket exposure, silver-loading, risk pooling and the roles of the Green Mountain Care Board and the Department of Financial Regulation in rate review and solvency oversight.

Nolan said he intended to "put a lot of these concepts on the table" rather than dive into detailed technical questions. He explained that most Vermonters in the private commercial market are covered through employer arrangements and that a large share of that employer market is self-insured, which federal law governs rather than state law. "One way to think about it: insured — the insurance company assumes the risk; self-insured — the company itself assumes the risk," Nolan said.

The briefing quantified market segments using recent data Nolan cited: about 34,000 people in the individual market (June 2024) and roughly 37,000 in small-group plans (employers up to 100 employees); large-group enrollment was cited near 17,500 (2020 data). He said self-insured plans make up the majority of the commercial market and therefore fall largely outside state regulatory control.

Nolan walked the committee through actuarial value, describing metal tiers under the Affordable Care Act: bronze roughly 60 percent, silver roughly 70 percent, gold roughly 80 percent and platinum roughly 90 percent of average covered spending paid by the plan. He noted that higher actuarial value generally produces richer benefits and higher premiums and explained cost sharing (deductible, coinsurance, copays) distinct from premiums.

On silver-loading, Nolan described the policy history behind higher silver premiums and how the federal subsidy structure interacts with that practice. He said the committee's discussion of merging individual and small-group markets would likely touch on silver-loading.

Mike Fisher, an invited industry expert, added that a recent actuarial estimate showed significant federal value from cost-sharing reduction (CSR) arrangements and said the board's actuary estimated the practice represented roughly "$40,000,000 [in] value to Vermonters." Nolan and other committee members discussed how silver-loading can make some richer plans appear relatively cheaper to consumers with federal premium assistance.

Nolan cited median out-of-pocket figures from the state's all-payer claims database for 2023: median per-individual out-of-pocket around $260 and median per-family about $2,000 among people with 12 months of coverage. He warned those figures can understate employer contributions that appear in the data as "out of pocket" because employer-funded HSAs or HRAs are not always separately tracked. He summarized 2021 survey results showing substantial use of these accounts: about 34% with an HSA, 13% with an HRA and 9% with both (survey year specified as 2021).

Nolan also reviewed statutory and administrative oversight. He explained that the Green Mountain Care Board performs rate review for insurers selling on the exchange and must decide whether rates are "excessive, inadequate or unfairly discriminatory" under Act 48; the Department of Financial Regulation assesses solvency and can recommend reserve actions. Nolan urged the committee to keep those supervisory roles in mind when considering legislation affecting benefits, mandates or market structure.

Committee members asked questions about historical changes and the limits of state authority. Nolan reminded members that Medicare and much of the self-insured market are federal domains. He noted Vermont previously merged its individual and small-group markets in 2017 and that the state is "temporarily unemerged" and slated to reemerge in January 2026, a change the committee may revisit.

The presentation closed with Nolan saying the briefing was meant to introduce concepts the committee will encounter when reviewing bills and policy options, and with an agreement to return to more detailed topics in future meetings.