Senate lawmakers on Thursday approved a health care cost-control measure intended to lower insurance premiums by allowing state regulators to more quickly reduce what some insurance plans pay hospitals.
The proposal, S.190, which is now on its way to Gov. Phil Scott, has emerged as one of the legislature’s most significant health care actions this year, highlighting growing concern over the rising cost of health care and the fragile finances of Vermont hospitals.
The bill would speed up the implementation of reference-based pricing, which was otherwise scheduled to roll out more broadly in 2028. The system ties what insurers pay hospitals for services to a benchmark, typically Medicare reimbursement rates. For the coming fiscal year, the policy would apply specifically to health benefit plans offered to public school employees by a health benefit association, known as the Vermont Education Health Initiative, and people or small businesses who buy insurance through Vermont Health Connect.
Rep. Alyssa Black (D-Essex), chair of the House Health Care Committee, said she was thrilled by the bill’s passage from her chamber last Friday after it had undergone extensive changes in recent weeks. The House vote fell largely along party lines after an extensive floor debate, with 87 members, mostly Democrats, voting in favor and 44 voting against. The reforms expected in fiscal year 2027 are necessary and timely, she said.
Sen. Ginny Lyons (D-Chittenden-Southeast), who introduced the bill and is chair of the Senate Committee on Health and Welfare, said the measures will help both to reduce costs for health care consumers and maintain sustainable hospital finances. Lyons has long advocated for reference-based pricing.
“This is a next step for improving our system of care — our hospitals — through cost reduction and making health care more affordable for Vermonters,” Lyons said on the Senate floor on Thursday, ahead of the chamber’s vote.
Health care costs in Vermont are among the highest in the country, driven in part by hospital prices that are significantly higher than national benchmarks. State policymakers and consumer advocates say that drives up insurance premiums and property taxes, particularly as health care expenses for school district employees continue to climb. Hospitals, meanwhile, emphasize rising labor costs, inflation and increased demand for services.
Several Senate Republicans expressed skepticism on Thursday about whether the bill would contain health care costs or help smaller, rural hospitals. Sen. Russ Ingalls (R-Essex) recognized that Vermont’s health care costs eclipse those of neighboring states, but he said he could not back a bill that would “transform” the current system without knowing the likely savings.
In response, Lyons said the bill is projected to save roughly $36 million next fiscal year for VEHI health plans and between $40 million and $70 million for qualified health plans through Vermont Health Connect. She cautioned, however, that the precise cost savings will ultimately depend on the actions of the Green Mountain Care Board, a five-member independent state regulatory panel. Because the bill does not appropriate funds, she said, professional staff in the Statehouse’s Joint Fiscal Office did not prepare a fiscal note estimating savings.
The bill ultimately passed in the Senate along party lines, 17 to 13.
Each year, hospitals submit proposed budgets to the state, outlining how much revenue they expect to bring in and how much they plan to spend. The Green Mountain Care Board then reviews those budgets in public hearings, weighing factors such as labor costs, patient demand, inflation, hospital finances and the impact on insurance premiums.
The Green Mountain Care Board has the power to approve, reject or modify proposed budgets before the start of the hospital fiscal year in October. The newly passed measure allows the board to more specifically direct where hospitals reduce revenue within certain insurance plans, but it does not expand the board’s authority, Black said.
In effect, S.190 creates a temporary framework for early implementation to allow regulators to begin directing hospital payment reductions in the upcoming fiscal year for the public school employees and those who purchase plans through Vermont Health Connect, even before a broader statewide rulemaking process is complete. Black said that by focusing on these two groups, regulators can have an outsized impact on the state’s health care costs because the state can target smaller, more vulnerable markets —especially the qualified health plans under federal pressure — which she said will concentrate savings where they’ll matter most.
House Speaker Jill Krowinski (D-Burlington) said in a statement on Tuesday, following the bill’s passage, that S.190’s model of reference-based pricing will lower health care costs, contribute to lowering Vermonters’ property taxes and help hospitals that are facing lower revenue.
Hospital leaders have said that their institutions in Vermont could absorb $50 million in reduced annual revenue over the next two fiscal years without jeopardizing patient care or long-term financial stability.
Devon Green, vice president of government relations for the Vermont Association of Hospitals and Health Systems, said in a written statement to Seven Days on Tuesday that the association supports “striking the right balance between affordability and ensuring that Vermonters can get the quality care they need” but said the group was “neutral” on the bill passed by the House and Senate.
In April, the head of UVM Health told lawmakers the medical center was losing roughly $460,000 per day. The health system has implemented cost-cutting measures primarily focused on boosting provider productivity and trimming administrative costs. Lawmakers and state regulators have argued that the financial strain reflects a necessary reckoning in Vermont’s health care system, where the goal is to rein in some of the nation’s highest insurance premiums without irreparably destabilizing the hospital system.
The legislation reflects a continued shift in Vermont’s health care politics, as lawmakers increasingly look for ways to directly restrain hospital spending after years of failed or stalled reform efforts.
Mike Fisher, Vermont’s health care advocate, said that the bill accomplished the two main targets he hoped lawmakers would meet this year: take action for 2027, and define the goal posts for reference-based pricing’s desired impact. It will ultimately be up to the Green Mountain Care Board to decide how, exactly, to implement the changes, Fisher said, but the bill marks progress in the effort to “right price” Vermont’s health care.
It is unclear, however, whether the bill will earn support from the governor when it arrives at his desk. Lyons lamented on Thursday that reference-based pricing — a policy that had previously drawn bipartisan support — was now facing political resistance.
“If we don’t do this, we’re going to see more people leaving health insurance behind, filling emergency departments, more people going without the care they need,” Lyons said.
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