Payers tell committee Vermonts regulated insurance markets have lost money; hospitals and medical prices cited as main drivers

Representatives of the states major health insurers told a legislative committee on Jan. 17 that Vermonts regulated commercial insurance markets have slipped into multi-year losses, driven chiefly by rising hospital prices and medical spending.

Sarah Teachout, director of government and media relations for Blue Cross and Blue Shield of Vermont, said the carrier has paid out more in claims than it collected in premiums in recent years. "In 2023, for every dollar in premiums collected, we paid out a dollar 11," Teachout said. She said Blue Cross has asked the Green Mountain Care Board for a larger contribution to reserves this year and that the board granted a higher reserve request to stabilize finances.

Insurers and committee members traced the shortfall to several causes. Testimony cited rapid increases in hospital charges, hospital budget overages that exceeded the Green Mountain Care Boards approved budgets, and accelerating prices for outpatient medical services and drugs billed through hospitals. Teachout said hospitals in some years have exceeded approved revenue levels; in response regulators have sometimes required hospitals to reinvest overages into community projects or reduce future commercial rates. Committee members cited the University of Vermont Medical Center as an example of a hospital that faced regulatory reductions in its next-year commercial rate after prior overages.

Scale and market roles. Teachout described Blue Cross and Blue Shield of Vermont as a local Blue plan headquartered in Berlin with about 400 Vermonters on staff and roughly 228,000 members overall; she said the company recently became a subsidiary of Blue Cross and Blue Shield of Michigan for back-office economies of scale. Teachout and other witnesses noted the insurer sells a mix of individual, small-group, large-group, and Medicare products, including Medicare Advantage.

Jordan Esty of MVP Healthcare, a regional nonprofit plan, said MVPwhich covers roughly 30,000 Vermonters in the individual and small-group marketshas also experienced year-to-year losses in the state-regulated markets. Esty said MVP supports the committees H.31 clarifications on claims edits and prior-authorization definitions and urged lawmakers to focus on the cost of care as the primary driver of premium growth.

Medicare Advantage and enrollment shifts. Witnesses said many carriers have entered or exited Medicare Advantage in recent years; Blue Cross described reducing its ownership stake in a Vermont Medicare Advantage plan because of financial risk, and MVP said it exited Medicare Advantage in Vermont this year after concluding federal Medicare Advantage payments did not match local costs. Testimony also emphasized a long-term shift: the commercial, state-regulated market has shrunk relative to self-funded and multistate arrangements, a pattern witnesses said complicates the states ability to influence price and coverage through regulation.

Cignarepresented by Christine Cooneynoted that much of Cignas Vermont footprint is self-funded business governed by ERISA; she said the company has a smaller number of fully insured members in Vermont (about 3,000 in the 2023 report) but that trends in employer offerings and self-funding matter for policy design.

Financial scope. Witnesses gave a collective estimate for losses in the two state-regulated carriers in the recent five-year period: Teachout and Esty said Blue Cross and MVP collectively lost roughly $80 million in the Vermont-regulated markets between roughly 2019 and 2023. Both carriers said they have been drawing reserves in multiple recent years and that several structural factorsincluding high hospital prices and out-of-budget hospital revenuesexplain why.

What lawmakers said. Committee members expressed urgency and asked for more data. Several members asked the committee to invite the Department of Financial Regulation, the Green Mountain Care Board, hospital representatives and other stakeholders to provide detailed spending breakdowns, reserve balances, and options for rate or budget-setting changes. Lawmakers said they expected continued hearings and briefings before considering legislation that would alter hospital budgets, insurer rules or other system-level changes.

No formal policy decision was taken at the session. Insurers and legislators agreed to continue information-sharing and to schedule follow-up testimony as the Legislature considers measures to address insurance-market sustainability.