BlueCross BlueShield of Vermont says premium hikes are needed to stay financially solvent.
In May, the company asked state regulators to approve the highest-ever premium increases for individual and small group plans in the history of the Vermont exchange market, CEO Don George wrote in a letter to community leaders shared with Becker's.
In July, the company said it was placed in the "unprecedented situation" of amending its request to raise premiums even higher, Mr. George wrote. The company says its claim costs have increased significantly since May, draining reserves and leaving the company in a "fragile financial state."
"These increases are troubling for all of us and have positioned us between two extraordinary pressures — the skyrocketing increase in healthcare costs and the difficulty of providing affordable health insurance plans for our members," Mr. George wrote.
"Unfortunately, the high demand for medical services, increasing prices at hospitals, exponential growth in drug prices and new state laws are all forcing higher premiums to pay for the cost of caring for Vermonters."
In a July 12 memo, Vermont Commissioner of Insurance Kevin Gaffney wrote that BCBS Vermont needs to contribute more to its reserve funds to stay financially solvent.
Insurers must maintain adequate reserve funds to pay for unexpectedly high medical claims or other unforeseen events, said Mr. Gaffney.
"Over the past five years, BCBS Vermont has cumulatively collected inadequate premium rates to cover expected claims and expenses. This has resulted in a deterioration and immediate threat to the insurer's solvency," Mr. Gaffney wrote.
BCBS Vermont proposed upping its reserve contribution to 7%, up from 3% in its original proposal. These contributions are funded by premiums.
If approved, premiums for individual plans would increase 20.3%, and group market premiums would increase 23.1% in 2025, a BCBS Vermont spokesperson told Becker's. The market accounts for 18% of the company's membership, but 50% of its reserve needs.
Other markets will have proportional increases to cover the increased reserve funds, the spokesperson said.
The proposed rate increases and contributions to reserves must be approved by the Green Mountain Care Board, which regulates insurance premiums in the state.
BCBS Vermont will also cut administrative costs to improve its financial position, Mr. George wrote.
The insurer affiliated with BCBS Michigan in 2023, a deal that BCBS Vermont estimated would save the insurer $10 million in administrative costs over three years. Though the organizations are affiliated, premiums from BCBS Vermont and BCBS Michigan stay in their respective states and are used to pay claims and maintain reserves.
"Our recent affiliation with Blue Cross and Blue Shield of Michigan is designed to enhance our long-term sustainability and to more efficiently bring resources and scale to the organization," Mr. George said. "The value created through the affiliation will make us a more efficient plan and dramatically improve our technology, but Vermont's healthcare challenge is being driven by cost and utilization of healthcare."
Mr. Gaffney told the Burlington Free Press the BCBS Vermont's financial situation is "as dire as it sounds," but he believes the company will stay solvent with the right actions.
"BlueCross BlueShield of Vermont is a big tanker," Mr. Gaffney told the outlet. "We have to start to turn it. We can do that, and there are steps to do it."