Blue Cross Blue Shield of Vermont reported significant financial stress in 2024 driven by unexpectedly high medical cost trends, and the insurer and state regulators told a legislative Health Care committee on Jan. 9 that the carrier has taken steps to restore reserves but remains below long‑run comfort levels.

Nolan, the author of a Joint Fiscal Office issue brief on insurer solvency, walked lawmakers through how regulators use risk‑based capital (RBC) to flag companies that need corrective action. Nolan noted Blue Cross’s publicly reported RBC was about 607% in 2021 and dropped to about 214% at the end of 2024; he said that without a $30,000,000 surplus note from Blue Cross Blue Shield of Michigan the company’s RBC “would have been at 104%,” a level ‘‘basically borderline of regulatory having to assume control.’’

Ruth Green, chief financial officer of Blue Cross of Vermont, told the committee the company worked with the Department of Financial Regulation (DFR) and the Green Mountain Care Board on a comprehensive recovery plan. “Year to date through September … we saw a $47,000,000 gain,” Green said, adding that roughly half of that gain reflected improved alignment of premiums and claims and the other half reflected favorable, nonrecurring items such as settlement receipts and favorable PBM contract run‑outs. Green confirmed the insurer repaid the surplus note after those results.

Green described three near‑term drivers of the improvement: (1) nonrecurring inflows, including a UVM‑related settlement she said was about $12,000,000; (2) more favorable pharmacy benefit‑manager (Optum) run‑outs and settlements; and (3) operating expense reductions of approximately $7,000,000 (about 7% of Blue Cross’s 2025 budget). She cautioned, however, that the company still stood “only about halfway towards that minimum level that DFR requires for our member reserves,” and that rebuilding surplus is a multiyear process.

Both company and regulators emphasized the practical consequences of deep RBC erosion. Nolan and DFR witnesses warned that falling below affiliation thresholds could put the Blue Cross Blue Shield brand relationship at risk and would have major market consequences: Blue Cross serves roughly 200,000 benefit policyholders in Vermont, and a sudden exit could leave limited options for many residents and disrupt provider and state contracts.

DFR commissioner Mary Sampson said solvency is the regulator’s chief consumer‑protection duty and described the corrective measures already in place: frequent regulator‑company touchpoints, a submitted corrective action plan, and DFR‑led contracting work intended to secure hospital cooperation on cost control. “They have to have adequate rates,” Sampson told the committee, urging that rate adequacy and cost‑control work in tandem to protect the company’s capital position.

Lawmakers pressed for further detail on the sources of the 2025 gain and the durability of improvements. DFR and company officials agreed that some favorable items were one‑time; company leadership said they expect slower but continued progress in 2026 and will not rely on one‑time settlements to rebuild reserves. Committee members requested early utilization and prior‑authorization data under Act 111 and said they wanted to see follow‑up on hospital contracting and the rate‑review process.

The committee did not take formal action at the hearing. Witnesses agreed to provide additional financial details, utilization read‑outs, and any proposed regulatory or governance changes for further consideration.