Vermont’s insurance regulator has intervened to set significant guardrails on the contracts that hospitals and insurers are negotiating for the coming year in an effort to reduce health insurance costs for individuals, families and businesses in the state.
On Aug. 14, the Vermont Department of Financial Regulation — the state agency tasked with ensuring the solvency of insurance companies of all types — issued an order that escalated its involvement in what have largely been private negotiations between hospitals and commercial insurers over payment rates. Those negotiated prices — along with how much and what kind of health care hospitals provide to insured Vermonters — are a major factor determining the cost of monthly health insurance premiums for the year.
The department’s order requires Vermont’s two largest insurers — Blue Cross Blue Shield of Vermont and MVP — to demonstrate in writing that any agreements the companies make with the state’s larger hospitals and hospital network will lead to a “material reduction” in commercial health insurance premiums. The order also requires any contract to contain “discount provisions and other cost containment provisions that reflect industry standards.”
“The point of the order is to be flexible but also hold the feet to the fire for all parties in the negotiations. There needs to be cost savings here. The status quo will not do,” said Kaj Samsom, the Department of Financial Regulation’s commissioner, who issued the order.
This year, the average monthly premium for the benchmark plan on Vermont Health Connect, the state’s Affordable Care Act marketplace, hit $1,277 per month. That is the highest cost premium anywhere in the United States, 22% higher than a comparable plan sold in the next most expensive state, Alaska; more than twice as expensive as one sold in Maine; and almost four times the cost of one in neighboring New Hampshire, according to the health care data analysis nonprofit KFF.
Although just a fraction of people covered by commercial health insurance in Vermont purchase plans through the marketplace, the cost of those plans are impacted by the same factors that drive other premiums — the cost of health care services and how often they are used. The marketplace plans are also standardized in their coverage, so they allow for an easier comparison across states.
The department’s order is explicitly aimed at shoring up the finances of Blue Cross Blue Shield of Vermont, which has lost nearly $152 million between 2021 and 2025 and faces insolvency without drastic changes in its costs and revenue. However, Blue Cross Blue Shield of Vermont (BCBSVT) and MVP Health Plan, Inc. (MVP) are the only two insurers who sell health insurance plans on the Vermont Health Connect marketplace, so the department extended the order to apply to MVP as well, in order “to assure reasonable competition,” as the order states.
“There was a lot of hope by all parties that in the regular cadence of negotiation, Blue Cross and MVP could prevent some of the necessary insurance rate increases, through negotiated cost reductions with providers,” Samsom said. “All parties are trying to find common ground, but the fact is that they’ve failed.”
The order only applies to contracts between the two insurers and certain hospitals, generally the state’s larger ones: University of Vermont Medical Center in the Burlington area; Rutland Regional Medical Center; Central Vermont Medical Center in Berlin; Southwestern Vermont Medical Center in Bennington; Northwestern Vermont Medical Center in St. Albans City; Brattleboro Memorial Hospital and Porter Medical Center in Middlebury — the latter because it is part of the University of Vermont Health Network.
Blue Cross Blue Shield of Vermont sees this move from the department “as strongly supporting a more affordable healthcare system for Vermonters” as they work through negotiations with hospitals, Andrew Garland, a vice president and spokesperson for the insurer, wrote in an email.
Jordan Estey, an MVP vice president and spokesperson, also acknowledged the order’s significance in “addressing both affordability for Vermonters and long-term sustainability within the health care system,” in an email.
The Green Mountain Care Board, the state’s independent health care regulator, is tasked with setting guidelines for plans sold on the Vermont Health Connect marketplace and approving the annual premiums.
Due to a series of health care reforms signed into law this June, Blue Cross Blue Shield of Vermont has been able to lower its requested average premium increases — from 23.3% for individual plans and 13.7% for small group plans in May, to 15.1% for individual plans and 7.4% for small group plans. The care board expects to issue its guidelines for the 2026 marketplace rates on Friday.
While the department is pushing for even lower rates, it is unclear how the order will apply to the Green Mountain Care Board’s decisions on insurance rates. Regardless, the department is asking that board members give the move consideration as it makes hospital budgets decisions next month.
The power of the department’s order is limited, because the agency only oversees insurers and cannot compel hospitals to make the same cost-cutting efforts in their negotiations, Samson, the department’s commissioner, explained in a letter to board Chair Owen Foster. The letter suggests that complementary action from the Green Mountain Care Board could secure the savings needed to reduce premiums.
Foster acknowledged the letter but declined to indicate how the care board will act on the department’s action, citing its ongoing deliberations. But generally, “this all works better if we all work in alignment,” he said. “We work closely and very, very well with DFR every single day.”
Samsom said the care board could make a similar order, either by placing a revenue cap on major hospitals or ordering across-the-board unit cost reductions.
“[The Care Board] are the experts and they hold the keys necessary to understanding to where cuts can be made,” he said.
Both insurers expect fewer plans will be sold in the individual marketplace for 2026. With the likely end of federal subsidies at the end of this year, costs will increase dramatically for many purchasers. The expected disenrollment is one factor driving up the cost of premiums for those still insured.
“This is a crisis,” Samsom said of the end of the subsidies. “Those tax credits helped make things — I wouldn’t say affordable, but — more affordable and within reach for a lot of [individual marketplace] insurance buyers.”
Still, insurers and hospitals must find a path to move forward.
“At the end of the day, they have to come to an agreement,” Samsom said. “We cannot have the UVM Health Network be an out-of-network provider. At some point, we have to have a contract between all parties and an agreement.”
The order essentially bolsters insurers in their negotiations as the department has to approve any contracts the hospitals and insurers enter into. Despite that, Samsom said he will be sparing with his veto power.
“At this point we are looking for a plan,” Samsom said. That could look like BCBSVT and MVP striking tentative agreements with major hospitals on certain service cost reductions, or some type of risk-sharing component that helps cap the maximum claims, he said. “That’s what it would take for me to endorse the findings of such a contract.”
“I’m putting my thumb on the scale here to say we need more cost reductions from the major hospitals,” he added.
Kristen Fountain contributed reporting.
