Health insurance premiums in Vermont are high – and continuing to rise.

Average premiums for individual marketplace plans in Vermont are among the highest in the country, according to the Centers for Medicare and Medicaid Services, and are more than double the national average even when accounting for state subsidies.

According to data from the nonprofit health policy organization KFF, premium prices in Vermont are rising at double-digit rates, significantly faster than in most other states.

“There’s no doubt about it. Vermont is expensive,” said Mike Fisher, Vermont’s top health advocate. “We see that in our premium rates. We see that in our hospital rates.”

Although federal data only shows premium costs for individual plans, there have been similar cost increases for small and large employer group plans, according to Sara Teachout, a spokeswoman for Blue Cross Blue Shield.

“Hospital prices, drug prices, all of these things are the same across the market,” she said.

Most Vermonters don’t pay list price…

According to the Department of Vermont Health Access, about 30,500 Vermont residents are covered by individual market plans. Individual plans are plans purchased by individual consumers, rather than employers, on the state’s Vermont Health Connect marketplace. (They are called individual plans even though they can cover a family.)

The average monthly premium for these plans – the list price – was $874 in January 2024, among the highest in the country, according to federal data.

However, because these premium costs are offset by federal and state funds, most Vermonters who purchase these plans do not pay this list price.

More than 89% of Vermonters using these plans received some form of federal subsidy to fund them, according to 2024 data from the federal Centers for Medicare and Medicaid Services. After those subsidies, the average premium dropped to $243 per month, and Vermonters who received those federal subsidies paid an average premium of $178 per month.

The state of Vermont also helps low-income residents pay for their insurance with a benefit called Vermont Premium Assistance. This benefit sets a cap on how much Vermonters can pay in premiums for an insurance plan purchased on the marketplace, based on income.

According to the Department of Vermont Health Access, which administers the state’s marketplace, about 14,800 Vermonters with individual marketplace plans receive government subsidies toward their insurance premiums.

The department’s data, which is more current than that of the Centers for Medicare and Medicaid Services, differs slightly from federal figures. According to the Department of Vermont Health Access, the average amount of state premium subsidies for Vermonters was about $35 per month.

This will bring the average premium for Vermonters for individual market plans down to about $210 a month, according to the department. That’s still a higher premium than in about 40 states, according to the federal government.

Certain policy decisions also affect the list price of insurance premiums in ways that do not necessarily increase the actual cost of insurance.

In most parts of the country, health insurance premiums for marketplace plans are tied to the age of the shopper. Older shoppers, who are likely to be less healthy, pay higher premiums, while younger, likely healthier shoppers pay less. In Vermont, there is no such distinction, meaning younger shoppers pay relatively more money for plans, while older shoppers pay less.

Second, Vermont has used a tactic called “silver loading” – a practice that involves driving up the list price of a major silver insurance plan. (The plans available on the market are categorized into different metals – platinum, gold, silver, bronze – depending on their premium and deductible.)

Because the federal government’s premium tax credits are based on the cost of these silver plans’ premiums, the silver allowance actually helps Vermonters save money. When the price of these premiums increases, Vermont can take advantage of more money in the form of tax credits – making the premiums cheaper.

…but insurance is still expensive

Caveats, contexts, and complications aside, insurance in Vermont still isn’t cheap.

Even taking into account federal tax credits, the average premium for an individual marketplace plan in Vermont is $243 — the sixth-highest state average when including Washington, D.C., according to federal data.

Unlike individuals, small businesses are not eligible for government subsidies to pay for their employees’ health insurance, said Fisher, the leading advocate of health care reform.

“It’s kind of crazy,” Fisher said. “The small group is out there on its own. Small employers are out there on their own.”

According to current information from insurers, nearly 28,000 people in the state are insured with plans purchased through the small group market.

Earlier this month, the Green Mountain Care Board, a key health care regulator, allowed two commercial insurers that sell on the Vermont marketplace, MVP and Blue Cross Blue Shield, to further raise their premiums for individual and small group insurance.

MVP premiums are increasing on average by 14.2% for individual plans and 11.1% for small group plans.

Blue Cross Blue Shield premiums will increase even more – by 19.8% for individual plans and 22.8% for small group plans.

According to data from the non-profit health care think tank KFF, both insurers are increasing their premiums significantly more than the national average of 7 percent.

KFF compared 324 commercial insurers nationwide that reported preliminary rate increases. Vermont Blue Cross Blue Shield’s increase was the eighth-largest in the country, while MVP ranked 20th.

Blue Cross Blue Shield said the rate increases were necessary to offset what the state financial regulator said was a risky shortfall in the nonprofit insurer’s cash reserves.

“While we recognize this is extremely difficult for our members, it is a necessary financial step,” Don George, president and CEO of Vermont Blue Cross Blue Shield, said in a letter to community members last month. “Since May, health insurance claims have increased dramatically and our members’ savings have declined rapidly.”

Owen Foster, chairman of the Green Mountain Care Board, said in a press release earlier this month announcing the increases that the increases represent a “deep, fundamental failure of our health care system.”

“These rates are simply unacceptable, but the alternative of an insolvent insurer unable to pay for patient care would be even worse,” Foster said.

What are the cost drivers?

According to Carrie Colla, a health economist at the Geisel School of Medicine at Dartmouth, health care spending is essentially determined by the price of care multiplied by the amount of services used.

“As economists, we look at it as p times q, price times quantity,” she said.

In Vermont, both variables – price and quantity – have risen in recent years. In recent months, Blue Cross Blue Shield, Vermont’s largest commercial insurer, which covers about a third of the state, experienced what some administrators called a “claims wave” – ​​a jump in the number of claims filed by Vermonters who had received medical care.

This increase has been particularly strong in the last three to four months, says Teachout, spokeswoman for Blue Cross Blue Shield. But claims have also increased in recent years, she says.

Jordan Estey, MVP vice president for government affairs, said the high cost of care and the state’s policy choices are largely to blame for Vermont’s high premium prices.

“Health insurance is expensive because the cost of health care services is high,” Estey said in an emailed statement. “We see much higher prices in Vermont than in neighboring states for the exact same services, like MRIs and lab tests — which warrants further discussion about why that is and whether these higher prices are fair and reasonable.”

Estey warned that Law 111, a recently enacted law that limits the cases in which insurers can deny claims from providers, is also likely to increase costs in the future – including another 6% increase by 2026.

“This estimated six percent increase is on top of the ever-increasing costs of prescription drugs, hospital bills and other medical services in Vermont – and so we now face premium increases of over 10 percent on a consistent basis,” Estey wrote. “This is simply unsustainable.”

In recent years, Vermont hospitals have repeatedly asked for price increases for treatments.

The reasons for this are varied, according to health experts: The use of expensive specialty drugs such as the diabetes and weight-loss drug Ozempic is driving up costs significantly, officials say. A long-standing labor shortage has led many hospitals and medical facilities to rely on traveling medical staff, who cost more than local staff. Vermont has a severe shortage of long-term care facilities and nursing homes, resulting in hospitals providing care – often without pay – to patients who have nowhere else to go.

And as Vermont’s population ages, residents have more complex and severe medical needs that require more frequent and expensive treatment.

“We need more younger Vermonters who require less health care, are not taking medications and do not have chronic diseases,” said Stephen Leffler, president and chief operating officer of the University of Vermont Medical Center, at a meeting this spring with health care administrators and Vermont Senator Bernie Sanders. “We see and feel that every day.”

There may be even worse news ahead. During the Covid-19 pandemic, the federal government expanded eligibility for premium subsidies so that higher-income people could also tap federal funds to pay for marketplace plans. But without action from Congress, those expanded subsidies will expire at the end of 2025.

“Many of us who have been watching this ‘non-system’ of health financing – the way we finance health care – have been saying for years that it is unsustainable and that it cannot possibly continue like this,” Fisher said. “But it feels like we are in a much more acute stage.”