While the Statehouse buzzed in late spring with debate over how to govern and pay for Vermont’s schools, members of the House and Senate health committees pulled together novel reforms that are among the most consequential of the year.
The legislation, conceived and passed in the final weeks of the session with little fanfare, capped the prices hospitals can charge for outpatient prescription drugs. The new law has already been credited with slashing some proposed health insurance rate increases by more than half. Additional savings are anticipated in coming years under a separate late-session bill that will empower the Green Mountain Care Board to limit what hospitals can charge for care by tying prices to Medicare reimbursement rates.
For years, Vermont has tried to rein in soaring health costs with little effect. But this legislative session, in the shadow of the all-consuming education debate, lawmakers pushed through a measure that delivered results almost immediately. The success, legislators say, was possible in part because their policy making was not in the spotlight.
That provided an opportunity for lawmakers with expertise to take control of the issue, said Rep. Alyssa Black (D-Essex), chair of the House Health Care Committee. Black has served on the committee since she was elected to the legislature in 2021; this is her first year as chair.
“I sort of feel grateful in the end,” Black said, “because I think we got an enormous amount of work done because it wasn’t the priority.”
The bills have gained attention, however, in the months since they became law.
The new cap on hospital outpatient prescription drug prices has already bent the cost curve more than previous policies, according to Sen. Ginny Lyons (D-Chittenden-Southeast), who has served in the legislature for 25 years and has chaired the Senate Committee on Health and Welfare since 2019.
“I worked on this for many years, but having this one change have such an effect is outstanding,” Lyons said.
In the early 2010s, then-governor Peter Shumlin pursued plans for a single-payer health system that would have been the nation’s first. He pulled the plug on the effort in 2014, citing economic modeling that showed higher-than-anticipated costs.
Since then, policy makers have pursued an all-payer system that reimbursed providers a set amount per patient with hopes of encouraging preventative care. The model never took off, however, and analysis by state regulators found that it may have cost more than it saved. The system, known as OneCare Vermont, will shut down at the end of 2025.
Today, Vermont has some of the highest health insurance premiums in the country. In 2024, the monthly premium on the state’s insurance marketplace for a bronze plan, the least expensive tier, averaged $808. That’s nearly three times the cost in New Hampshire and more than twice the national average, according to the Centers for Disease Control and Prevention.
A confluence of factors is responsible for Vermont’s eye-popping premiums, but chief among them is the state’s aging population. The number of Vermonters over the age of 65 has nearly doubled since 2000. Health care facilities are treating patients with increasingly complex and costly health care needs while navigating workforce shortages, high labor costs and supply chain challenges that are particularly acute in rural communities. In the past five years, Vermont’s hospitals report spending 50 percent more — an additional $3.4 billion — to provide care.
Legislators on the health committees knew reining in costs would be one of their top priorities when they convened in January. Some representatives are intimately familiar with the problem: Several members of the House Health Care Committee, including Black, are bracing to go without health insurance next year, she said, because of high monthly premiums. (Lawmakers do not receive state health benefits.) But almost as soon as the session began, it became clear the rest of the legislature was not going to be similarly focused on the crisis.
Sweeping education reform proposed by the Scott administration quickly dominated conversations in the Statehouse. Health care costs were part of the equation, since rising health insurance costs for school employees are one reason school budgets have increased. But most of the debate centered around school governance
Working on urgent, complex reforms without the legislature’s full attention has benefits, Lyons said. While the spotlight can lead to more buy-in and pressure to act, it can also attract opposition that derails a proposal before a committee has worked out the kinks, she said.
High-profile bills often falter when politics gets in the way of policy reform, said Darren Allen, communications director of the Vermont-National Education Association.
“When something’s out in the forefront, there’s more grandstanding, there’s more attention being paid,” Allen said. “And it becomes maybe a little harder for folks to work and achieve the objective.”
The new cap on hospital outpatient prescription drug prices has already bent the cost curve on insurance premiums.
The House Health Care Committee took on systemic challenges, including removing red tape to make it easier to build, renovate or buy a health care facility. It also addressed the cost crisis and granted the Green Mountain Care Board emergency authority to adjust hospitals’ reimbursement rates if an insurer is facing insolvency. That’s because Blue Cross Blue Shield of Vermont had warned it was in dire financial straits.
In the Senate, Lyons drove forward another reform to bend the health care cost curve: reference-based pricing, a payment model that ties health care billing to Medicare rates. The policy was a top recommendation laid out in a 2024 report commissioned by the legislature.
Lyons said she introduced the concept as a framework, rather than a bill, to minimize attention from the press and foster conversation with her committee about how reference-based pricing could lower Vermont’s health costs. The reform, which Scott ultimately signed into law in June, won’t be implemented until 2027 at the earliest.
Other states have adopted this model. In 2016, Montana limited what its public employee health plan pays for services at a little more than twice Medicare’s reimbursement rates. Referenced-based pricing typically applies to all types of health services and items provided by a hospital — not just medication.
Oregon adopted the model in 2019, limiting hospital prices to double Medicare rates for state employees and teachers. Evaluations concluded that this saved more than $100 million without impacting hospital operations, according to a 2024 study in Health Affairs.
In May, representatives from Blue Cross Blue Shield of Vermont told the House Health Care Committee that the nonprofit insurer anticipated raising health premiums on the individual marketplace by more than 20 percent. Because federal tax credits that have helped ease the financial burden in recent years are likely to be discontinued, the committee concluded that Vermonters would not be able to weather such steep price hikes.
“We were looking for a way to very quickly pull money out of the system,” Black said.
Experts testifying before the committee repeatedly presented a chart from a RAND study that showed Vermont hospitals charged insurance companies the nation’s highest outpatient drug prices — more than five times the average sales price.
“It was just like this gentle curve, one through 49, and then number 50 was Vermont, and it was just this huge spike,” Black said.
Black felt the practice was immoral. It also gave the committee a rare opportunity to bring down costs quickly. The committee proposed capping the amount hospitals could charge for outpatient prescription drugs at 120 percent of average sales prices as calculated by the Centers for Medicare & Medicaid Services.
Elsewhere in the building, lawmakers were finishing work on education reforms, many of which are not anticipated to take effect until the 2030s — and that is only if lawmakers can agree on major implementation milestones such as school redistricting maps. In contrast, Black’s committee proposed that its price restrictions take effect in January.
Despite opposition from health care providers, the committee backed the new language 11-0 in a straw poll after little more than a week of debate. Members knew that their decision could irk powerful interest groups looking to maintain the status quo.
“I was scared doing that, and I know other members on my committee were,” Black said. “In the end, frankly, I know we did the right thing.”
Mike Del Trecco, president and chief executive officer of the Vermont Association of Hospitals and Health Systems, said the association expressed concern about this aspect of the bill and had hospital representatives reach out to share impacts and offer alternatives.
Defying the health care industry was a bold break from tradition, according to Chris Pearson, a former Chittenden County legislator and current board member of Vermont Healthcare 911, a bipartisan coalition established in January 2025 to advocate for lower health care costs.
“I am hard-pressed to think of a time when the legislature thought of a health care reform proposal, heard that the hospitals opposed it across the board, by the way, and then went ahead and passed it anyway,” Pearson said.
Scott signed the bill into law less than two weeks after the House Health Care Committee voted in favor of the cap. The new limits on drug prices are already being credited for helping to drive down insurance premiums for Blue Cross Blue Shield Vermont and MVP Health Care, the two insurers that sell plans on the state marketplace.
On August 22, the Green Mountain Care Board approved a rate increase for the individual insurance market of 9.6 percent, down from 23.5 percent requested by Blue Cross earlier this year. The board approved a 1.3 percent increase for MVP, down from the 6.2 percent initially requested. The lower increases are a welcome change after near double-digit growth in recent years.
The price cap is the first policy in decades to have had such an impact, said Owen Foster, chair of the Green Mountain Care Board. The board was created by the legislature in 2011 as an independent oversight body to regulate major areas of Vermont’s health care system.
The difference with the bill, Foster said, is “it was real, it was bankable, and it was immediate.”
Not all insurance plans will see such stark relief from premium rate increases. Employer group plans will have different premium rate increases depending on their size. Blue Cross will raise insurance premiums for small group plans by 4.5 percent (down from the 13.5 percent initially sought), but it is not yet clear how much rates will increase for large group plans. Increases for plans can vary depending on how services are used, the age of patients, and whether people enroll individually or as a family, among other factors.
Del Trecco said the lower premiums will reduce hospital revenue by an estimated $130 million. Hospitals are exploring approaches to handle the change, from dipping into their reserve funds to finding new ways to lower expenses. The association is advocating for payment reforms, including changes to the current revenue model to switch from fee-for-service to value-based payments, to balance out the new price caps.
And so far, as hospitals prepare their budgets for fiscal year 2026, which starts October 1, it appears that despite the recent legislative change, most facilities have found a way to stay within the budget guidance standards set by the Green Mountain Care Board. The board, Vermont’s health care regulator, sets annual benchmarks for hospitals’ budgets. This year, it capped hospitals’ growth for both operating expenses and commercial insurance charges at 3 percent.
The board is expected to make its final hospital budget determinations later this month.
While the reference-based pricing reform won’t go into effect until 2027, Foster is optimistic that it will help curb rates further. Legislators have cautioned, however, that the timeline may be pushed back because of how complex the process will be.
Ample evidence suggests reference-based pricing will allow hospitals to be profitable while still lowering costs for insurers and patients, Pearson said. He applauded the legislature for teeing up a long-term solution in addition to the more immediate relief provided by the pharmaceutical bill.
Lyons is confident that both policies will help.
“The combination of those two is going to be ongoing savings. There’s just no doubt about it,” Lyons said.
Pearson said the reforms were proof that Vermont’s legislature, despite its part-time structure and flighty attention span, can still act decisively on complex issues — even while it tackles other major reforms.
“This is the best thing about the Vermont legislature,” he said. “People are learning, they’re hearing from experts, they’re hearing from the public, and they’re getting a better sense of what’s actually going on.”
The original print version of this article was headlined “Legislation, STAT! | Health care expenses were not the main focus of the legislative session. Lawmakers say that may have helped them address the problem.”
This article appears in 30th Birthday Issue.
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