5 Factors Considered for Premium Rate Increases

Across the country, and especially here in Vermont, we’ve all seen prices increase over the last few years. Food, housing, cars, and other items are more expensive than they once were. Unfortunately, the cost of health care is also going up, in Vermont and across the country. 

In this article, we want to share with you the factors that go into our rate increase requests, this year’s unusual circumstances, and what we’re doing to ensure that you will continue to have access to high quality health care.

Trends Driving Costs

Nationally, health plans are under enormous cost pressures, driven by massive increases in claims, soaring drug and hospital prices, and higher than expected use of medical care. Many health plans around the country are seeking rate increases, some in the double digits.

Here in Vermont, several trends have combined to greatly increase health care costs:

• Vermont hospital costs are 48% higher than the national average, and they continue to increase rapidly.
  Increased utilization of health care services has surged since the COVID-19 pandemic, as Vermonters access more care. Over the last 30 months, members’ health care claims have increased dramatically, with a significant jump in just the last three months.
• Pharmaceutical costs continue to skyrocket, especially with new expensive drug treatments for diabetes and weight loss. The total cost of pharmaceuticals has increased by more than 10 percent this year.
• State policy decisions, such as the recent law passed by the Vermont Legislature this year which prevents us from using certain cost control measures, including prior authorization for services and treatments ordered by primary care providers (Act 111). This legislation adds to the costs for our members through premiums.
• Contribution to reserves, as required by the Vermont Department of Financial Regulation (DFR) to maintain member reserves, which protect members from unforeseen circumstances. For example, during the COVID-19 pandemic, the cost of vaccinations, testing, and treatment were covered by reserves. Our annual premium rates must include a certain amount to be set aside for member reserves.

How This Impacts 2025 Premiums

As a non-profit health plan, our premiums are designed to add a small margin each year (contribution to reserves) to our member reserves. In May, we submitted our annual rate request for qualified health plans (QHPs) to the Green Mountain Care Board, which reviews and approves our rates. We initially submitted rate increases of 16.3% for individual plans and 19.1% for small group plans. However, due to the rising costs of care and increased utilization of services, in July, we were forced to revise our ask to a 21% increase for individuals and a 24% increase for small groups.

The 2025 rate increases will allow us to increase our member reserves and better position our organization for unplanned expenses, such as surges in members utilizing health care services. These rate increases are troubling for all of us and have positioned us between two extraordinary pressures—the skyrocketing increase in health care costs and the difficulty of providing affordable health insurance plans for our members. 

Our Response

We are deeply troubled by the pain these rate increases will cause our members. We know that many of you are struggling to pay the higher costs of food, housing, and other essential items. We are doing everything we can to keep our health plans affordable. 

We’ve always kept our administrative costs low, with only about 6 cents of every premium dollar going towards the cost of running our organization. We’ve now tightened our belt even further and are also working hard with our affiliation partner, Blue Cross Blue Shield of Michigan, to implement new technology and processes that will enable us to operate more efficiently and lower our costs even more.

Again, we realize these rate increases will be extremely difficult for our members. As the cost of care rises, increased premiums must grow to cover Vermonters’ health care and to ensure that we’ll continue to serve our members for many decades to come.