The president of BlueCross BlueShield of Vermont sent a letter to state lawmakers, businesses and health care leaders this week describing the insurer’s alarming finances: They’ve lost $100 million in five of the past six years. And recently, in October, the company lost more than $13 million alone — the highest month for paid claims in their history.
"As a direct result of escalating prices for medical services and pharmaceuticals, Vermont’s commercial healthcare premiums — already high and growing at an unsustainable rate — are not covering the cost of care," wrote Don George, president and CEO of the insurer.
According to federal data, Vermont has the highest premiums for employer-based health insurance of any state. For this year, BlueCross raised its rates by nearly 20% for individuals and almost 23% for small businesses after several years of double digit increases. BlueCross VT says the state's demographics — its old, rural population — are only partially to blame for their increasingly expensive premiums.
“We really want to dispel that myth, because we can’t solve our problems if we’re blaming it on the wrong thing,” said Sara Teachout, the spokesperson for BlueCross.
"Demographics does not explain away the problem," echoed Owen Foster, chair of the state's health care regulator, the Green Mountain Care Board. “We can't just point to that and say there's nothing we can do.”
Demographics does not explain away the problem ... We can't just point to that and say there's nothing we can do.Owen Foster, Green Mountain Care Board chair
Teachout said looking at comparative data from BlueCross insurers across the country, and accounting for Vermont’s demographics, health care prices in the state are still 26% higher than the rest of the Northeast.
Hospital prices
BlueCross says a big reason for the state’s disproportionate costs stems from prices at Vermont hospitals and across the health care system. Prices charged for hospital outpatient care in Vermont are among the highest in the country.
“Hospital costs make up about half of our health care spending, and they're a driver of escalating health care costs,” said Julie Wasserman, an independent health care consultant. She’s written about the cost of emergency room care at the University of Vermont Medical Center, the state's largest hospital and among the top 10% most expensive for outpatient services in the country.
Annie Mackin, a spokesperson for the UVM Health Network — which UVM Medical Center is a part of — said the hospital is working to reduce the cost of care, including a recent cut to radiology prices by 25%.
“We think there’s a path forward to address affordability in Vermont and transition to a value-based system,” she said in an emailed statement. “[We] are eager to work with our government, insurer and business community to address the issue more broadly.”
Mackin also said there are other factors, beyond health care prices, contributing to the financial situation of BlueCross VT.
The letter from the insurance company, warning of their precarious financial position, comes weeks after the UVM Health Network announced cuts to patient services to comply with budget orders from the Green Mountain Care Board. The orders required the hospital system to limit its operating revenue and reduce how much it can charge commercial insurance companies by 1%.
A recent bond disclosure report shows the UVM Medical Center and a group of affiliate hospitals made $86 million in net income from operations last fiscal year. Regulators pushed for the revenue cap in an attempt to rein in health care prices.
"We have a healthcare financing system that is not functioning,” said Mike Fisher, the state’s chief health care advocate. “So the BlueCross letter becomes sort of a blinking red light.”
Leaders of BlueCross VT say without any change in controlling the state’s rising health care prices, premiums will continue to go up at unsustainable rates.
“It's nuts, people can't pay it,” said Foster, with the Green Mountain Care Board. “Yet, if you don't, BlueCross faces very serious insolvency. And if they go bankrupt, that is Armageddon in that you’ll have providers not being paid.”
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