Vermont’s Strict Control of the Health Insurance Marketplace Restricts Choice and Drives Up Costs

    

Vermont residents face a highly consolidated individual health insurance marketplace, with only two carriers offering plans for 2023—MVP Health Care and Blue Cross Blue Shield of Vermont. This duopoly limits consumer choice and alternative coverage options within the state. Further analysis shows Vermont’s strict control over marketplace participation correlates clearly with premium rates being substantially higher than larger states and even similarly-sized populations. By modifying key regulations and taking gradual steps to allow increased health insurance competition, Vermont policymakers could exert downward pressure on pricing to benefit everyday residents and small businesses.

Evaluating Vermont’s Limited Carrier Landscape

    According to the Vermont Department of Financial Regulation’s 2023 QHP issuer participation report, MVP Health Care and Blue Cross Blue Shield Vermont control 86% and 14% market share respectively. No other carriers offer exchange plans this year, after CignaHealth and CVS Health exited recently. This high industry concentration restricts options among carriers with meaningfully differentiated plan designs, provider networks, and service capabilities. Research shows greater choice is consistently among consumers’ highest-rated priorities for insurance marketplaces. Most other states actively court new entrant participation annually. Yet Vermont’s strict solvency and certification laws deterred competitors, even prior to the COVID-induced withdrawals.

    Residents inherently lose when the status quo faces such little threat from rivals. Consider other complex consumer products—Vermont would not limit personal computer or smartphone options for shoppers to merely Apple or Dell. Yet they employ comparable logic restricting healthcare coverage selection. Consumers often vote with their wallets, but cannot truly do so under rigid monopoly-like conditions.

Analyzing the Cost Impacts

    Unfortunately, limited competition also directly corresponds to higher insurance premiums in Vermont.

    Compared to Wisconsin, which boasts over thirteen carriers in its marketplace, average 2023 premium rates run 24% higher in Vermont ($629 vs. $490 monthly). Michigan and Pennsylvania also maintain over a dozen choices for residents. Costs similarly run 32% and 30% below Vermont’s Individual marketplace averages, respectively. This consistent pattern exposes the negative pricing effects of insufficient insurer availability from the consumer standpoint.

    Industry defenders may cite Vermont’s unique compact risk pool merger as part of justifying strict participation rules to maintain pricing stability. Yet further comparisons even against demographically similar states indicate this represents a false tradeoff. North Dakota actually mirrors Vermont’s small population of approximately 625,000 residents. However, its marketplace still attracted Blue Cross Blue Shield, Sanford, and Medica competitors. Consequently, average premium rates run 14% cheaper than Vermont ($539 vs. $629 monthly). Enrollees also benefit from having alternate coverage networks and options to choose between based on individual family needs and preferences. Even with minor population differences controlled for, data decisively shows limited carriers directly correspond to higher prices and barriers to shopping for the best value.

    California presents an especially compelling case study on the impacts of limiting insurer choices. Despite its massive population dwarfing Vermont seventy-fold, California officials constructed their exchange marketplace to facilitate over eleven major payers competing vigorously. The result—average premium rates clock nearly 30% below highly-consolidated Vermont, at $438 monthly. Clearly extensive choice provides the leverage and motivation necessary to restrain premium increases year-over-year. Controlling costs ultimately requires consumers have the power to switch between alternative offerings if any one carrier price gauge objectionably. Unfortunately, single digit insurer availability prevents such consumer checks-and-balances from meaningfully occurring in Vermont’s existing paradigm.

    Overall, economic research overwhelmingly concludes monopoly-like conditions almost universally fail to produce outcomes optimizing for consumer benefit long-term. Sustainability requires some form of external balance of power. Yet Vermont’s administration continues resisting calls to implement policies empowering customers and facilitating market forces through competition. Consequently, lifelong residents and small enterprises endure steadily mounting insurance costs straining household budgets and Operating margins each year. Lawmakers must acknowledge this economic reality and chart a course welcoming adequate carriers to open consumer choice and control pricing through market competition once more.

Potential Policy Changes to Invite Health Insurer Competition

    If consumer-friendly competition represents the cure for Vermont’s marketplace affordability woes, then what reforms can policymakers enact to attract expanded carrier participation? Given other states' successes on this front, regulators possess several promising policy levers potentially available:

        1.  Repeal laws mandating merger of individual and small group insurance pools. Segregating risk segments again would incent national payers to re-enter serving one pool or the other with tailored plan designs. Actuaries estimate at least four carriers sustainably operating per market given Vermont’s population.

        2.   Reform solvency, network access, and consumer protection certification restrictions automatically denying most applicants today. Consider implementing cooperative multistate oversight frameworks through financial or insurance regulation compacts instead. Welcome all technically-qualified, financially stable carriers meeting simplified standards.

        3.  Require the Department of Financial Regulation to objectively demonstrate probable consumer harm before denying any carrier licenses facilitating marketplace entry. Codify simple, consistent qualification standards across payers. Insurer variety itself boosts system resiliency against potential future market exits or insolvencies threatening continuity-of-coverage.

        4.  Explore reciprocity frameworks with other New England states establishing uniform participation rules for their exchanges/marketplaces. Carriers could enroll and service Vermonters operating under partner state regimes instead of needing redundant approvals.

    No silver bullet legislation exists to suddenly diversify Vermont’s coverage landscape overnight after years of barriers and consolidation. Nonetheless, the above policy levers represent viable first steps. Signaling receptiveness to new payers also encourages innovation benefiting consumers. Incremental market liberalization reforms may progress slower than desired, but can meaningfully enhance cost competitiveness and choice in the coming years if leaders commit today.

    Some may argue that attracting more private insurers could risk pooling higher-risk Vermonters out of affordable coverage options. However, Governor Scott’s recent proposals around expanding Medicaid access for low-income households offer alternatives. Broadening this public coverage safety net funded through federal partnership helps guarantee care for vulnerable demographic groups. Medicaid enhancements warrant consideration regardless as part of comprehensive affordability solutions. But they need not forestall private insurance market growth as well. Vermont can and should support both parallel tracks.

    Vermonters deserve affordable, sustainable insurance marketplace dynamics benefiting families–not protecting monopoly interest status quos. The legislature should acknowledge economic realities facing Vermonters and forge solutions through open insurer participation and competition if we desire better cost control for the future. The clock ticks as another open enrollment commences limited choice and priced 30% higher than other states. There lies the consumer call-to-action Vermont officials must finally heed.