Photo: Vermont State House. VermontBiz photo
by C.B. Hall VermontBiz by The rapid rise in health care costs came into focus this spring when Vermont’s Legislature, facing a projected increase of about 18% in the property taxes that help finance Vermont’s schools, approved tax increases that reduced the projected bump to about 14%.
The Yield Bill, as it is known, makes no reference to savings in the school system’s costs, which conspicuously include employee health care benefits. Instead, it called for a commission to make recommendations aimed at a “sustainable“ future for public education in the state. But public discussion surrounding the bill highlighted health care costs, which, as it happens, have been projected to rise throughout the state by roughly the same percentage as overall school expenditures.
As of press time, Gov. Phil Scott had not taken action on the bill, but had commented on its lack of specific attention to cost containment in health care and other categories. Many voters appeared to share his sentiments, as 33 of the 120 school budgets presented to the voters this spring were rejected as too high. As of this writing, only 12 of those 33 have been approved on revotes, in the wake of cuts in the budget proposals.
Scott was expected to veto the Yield Bill, which would send it to the legislative veto session scheduled for June 17.
The question of publicly funded health care costs came into sharper focus, albeit with less éclat. In March, the Commission on Public School Employee Health Benefits — the labor and management negotiators who set the contract terms for school personnel — announced that it had decided unanimously to retain current arrangements for insuring the school system’s employees for the next contractual period, which runs from Jan. 1, 2026, through Dec. 31, 2027.
According to a statement, the commission agreed, over the next two years, “to discuss changes in current health insurance plans with the Vermont Education Health Initiative, the entity that offers health benefits to school districts and school employees,“ with the assurance that “everything will be on the table, including wellness and preventive care.“
In a statement for this article, Mike Campbell, a teacher at Bellows Free Academy in St. Albans and the commission’s co-chair, explained that “instead of going round and round over who pays what, the members of the commission are dedicated to ensuring that educators and all Vermonters have health care that is affordable, comprehensive and available when needed.“
On average, the premiums for the four current plans that cover Vermont school personnel are 16.2% higher than last year. Generally, an employee pays 20% of the premium while the school district covers 80%. A typical employee’s monthly premium thus ranges from $174 to $208; when the district’s share is factored in, the total cost of the plans range from $869 to $1,040 per month. As of July 1, employees’ monthly costs will rise to $203 to $241, resulting in a total plan cost of $1,014 to $1,203 per month.
The Vermont Education Health Initiative, known as VEHI, contracts with Blue Cross of Vermont to provide administrative services to VEHI, school districts, school employees and the state system for retired teachers in the provision of health benefits, including claims processing and customer service, administrator Bobby-Jo Salis explained in an email. Premiums are paid monthly to VEHI and transferred to Blue Cross Vermont on a weekly basis to pay for claims and expenses.
The VEHI coverage is a type of self-insurance, meaning that the beneficiaries and their employers set up their own plans — and a risk pool to finance it — rather than using off-the-shelf plans from an insurance company, such as Blue Cross.
Insurance for state employees is not greatly different from what covers employees of Vermont’s school districts.
Department of Human Resources Commissioner Beth Fastiggi said that self-insurance, which she uses, “would be considered a platinum plan.“
Sara Teachout, director of media relations at Blue Cross, said that organizations that negotiate such customized plans “generally choose what they want for their own members. The unions work very hard to ensure very comprehensive plans. Because they’re unions, it would be very hard for them not to ensure such plans.“
Not surprisingly, the school and state employee plans are not the only publicly subsidized coverage affected by recent price hikes.
According to a release from Blue Cross, costs for coverage options offered by Vermont Health Connect, the state’s subsidized health insurance marketplace, will increase between 16.3% and 19.1% in 2025.
The release went on to say that, in addition to price hikes for prescription drugs and hospital care, “the cumulative impact of state health policy choices that consistently weigh access and expanded benefits over affordability are the third lever that is contributing to the high premium increases.“
In health care, the getting and spending are hard to constrain. If a doctor — or a television advertisement – recommends a new medicine or procedure that insurance will cover and potentially save a person’s life or guarantee more years of good health, that person is hardly likely to refuse it. Health care sells something priceless: life itself.
That generalization subsumes a lot of specifics, which is where the controversy begins.
“The Legislature will often say we want this to be covered. Then it must be covered,“ explained Andrew Garland, Blue Cross’s vice president of client relations and external affairs.“
Photo: Andrew Garland, Blue Cross of Vermont’s vice president of client relations and external affairs. Courtesy photo.
The Affordable Care Act, enacted during the Obama administration, outlined 10 categories of essential health benefits that insurers must cover, but left it up to each state to define the specific conditions that must be covered in those categories.
“There’s a lot of cost in not covering something,“ Garland said, pointing to the care often required when a condition hasn’t been nipped in the bud.
Accordingly, in the words of Blue Cross Vice President and Chief Medical Officer Tom Weigel, the company “is really committed to providing its customers with comprehensive coverage.“
Photo: Dr. Tom Weigel, Blue Cross of Vermont’s vice president and chief medical officer. Courtesy photo.
A related factor is what might be called diagnosis creep, whereby long-standing diagnoses acquire broader definition.
According to the Autism and Developmental Disability Monitoring Network, which is funded by the U.S. Centers for Disease Control and Prevention, the incidence of autism in 8-year-olds, for example, increased from 1 in 150 in 2002 to 1 in 36 in 2020. The rise resulted from “changes to diagnostic criteria and more public awareness,“ a recent USA Today report found.
Then there’s the cost of prescription medications. In early May, the Legislature passed Bill S.98, which directs the Green Mountain Care Board — the statutory agency that oversees many elements of health care around the state — to “create a framework and methodology for implementing a program to regulate the cost of prescription drugs for Vermont consumers and Vermont’s health care system.“
As of this writing, the legislation awaits action by Gov. Scott. While Blue Cross supported the bill, Teachout cautioned that “probably, from a drug manufacturer’s perspective, (negotiation of prescription drug prices) is not very attractive to do with a very small state. It probably makes more sense to do that at the federal level.“
With demand bolstered by advertising and samples distributed to physicians, the specialty medications used in treating complex or rare conditions command particularly high prices.
“Specialty medications have the most expensive cost in prescriptions,“ said Mark Hage, benefits manager at Vermont-National Education Association, the union of Vermont educators, who also works under contract for VEHI. “They currently represent about 55% of our pharmaceutical cost, but only about 2.3% of our claims.“
Hospital costs represent an even greater problem. The Blue Cross release blamed such expenditures for nearly two-thirds of its projected rate increase. Hage likewise pointed to hospitals as “the highest cost in health care.“
Blue Cross’ Garland noted that in Vermont “we don’t have excess capacity in our system. We don’t have competition in our system.“
Weigel raised an often-cited overarching problem. “Much of the U.S. health care system relies on a fee-for-service model, paying providers for each service rather than for patient outcomes. In contrast, a value-based model ties payments to the quality and cost-effectiveness of care. Another alternative is Canada’s single-payer system, where the federal government funds health care, sets provider rates and negotiates drug prices nationally. This centralized approach achieves greater cost efficiency than individual U.S. insurance companies.
“To reduce health care costs,“ he added, “Blue Cross of Vermont is considering leveraging Canada’s economy of scale to purchase Ozempic and other costly medications. Unlike the U.S., Canada buys medications at a national level, which allows for more favorable pricing.“
Ozempic, a popular choice for weight loss and Type 2 diabetes, commands an average list price in the United States of $936 a month. The next highest average cost is in Japan: $169.
In the case of prescription drugs, however, there may be an effective way of undercutting the huge costs.
Weigel said that his company had joined with Blue Crosses in other states to establish Civica Rx, which now has a 140,000-square-foot plant in Virginia. The nonprofit generic drug company, he said, “manufactures drugs to compete with for-profit manufacturing.“
Already, he said, “it’s gotten the brand-name companies to reduce their prices on insulin.“
Added Garland, “There are some drugs that Civica will not be able to manufacture until it becomes legal to do so“ under patent-protection laws. There are other drugs that can already be generic, but one company has a monopoly on the generic, and they’re charging more than necessary.“ Civica, he said, may be able to underprice them.
Another issue is step-therapy: trying a cheaper or simpler remedy before resorting to a more expensive — and at times most expensive — treatment for a medical condition.
A bill signed into law this spring, H.766, will require insurance companies to cover treatments chosen by a physician, even if those treatments skip over other options — such as medications, procedures or lifestyle changes — that the insurer believes could be effective and less expensive, Teachout stated.
But a question arises: Wouldn’t a mandate to prescribe, where medically appropriate, a cheaper lifestyle therapy make sense as a first step that might avoid the use of pricey drugs? In the case of Ozempic, that could save a lot of money.
A recent article in the Cleveland Clinic Journal of Medicine notes that exercise, in conjunction with diet, is critical to losing weight and maintaining health in obese patients, although it can be challenging for an obese person to transition to a healthy lifestyle.
“I personally would not support mandating exercise as a remedy,“ responded Clarke Collins, deputy director of benefits, wellness and leave management at DHR, who consults with the state on health care questions. “Some patients can’t do it. Physicians are in a position to mandate what will work for their patients. If they think the patient would benefit from starting off with Ozempic, that’s the physician’s call.“
“We opposed (H.766) because health plans use a variety of tools to provide the proper care,“ Teachout said. The new statute “eliminates all prior authorizations for any provider. In general, it very much limits our ability to eliminate extra costs.“
“That’s why we have prior authorizations for things like weight-loss medicines,“ Weigel said, speaking before Scott signed the bill.
In addition to weight-loss drugs, the insurer also covers, for example, factitious disorder, a patient’s invention of nonexistent conditions, as a psychiatric disease.
This correspondent brought up a more unusual condition he had dealt with personally. In a European country where he’d lived, and inquired about fixing a cataract for his damaged left eye, the national health insurance plan would not cover the procedure because the right eye was healthy. With Blue Cross, coverage of that is standard.
Gender identity dysphoria — seeing oneself as a member of the sex opposite from one’s sex at birth — is meanwhile covered in Vermont under 2023 laws and a follow-up bulletin from the Department of Financial Regulation that gives gender-affirming care broad legal protections, in contrast to laws and practices in many parts of the country.
Could the cost problem be alleviated by replacing the plans enjoyed by public employees with plans from Vermont Health Connect’s marketplace of publicly subsidized offerings?
Premiums for Vermont Health Connect plans include a relatively small public contribution to premium costs. Assuming, for instance, a yearly income of $70,000 — somewhat more than an average Vermont teacher’s salary — the individual living alone and holding a VHC plan would be paying $273 to $823, while a fixed subsidy of $454 would cover the rest of the monthly premium. For the Vermont Education Health Initiative plans, taxpayers currently defray from $695 to $832 of the policy’s premium; on July 1, that contribution will rise to $811 to $962.
“That’s something that we’d have to negotiate on“ in the bargaining process, Fastiggi said.
Asked to comment on a shift to the VHC marketplace, state Rep. Emilie Kornheiser (D-Brattleboro), whose Ways and Means Committee wrote the Yield Bill, said, “The Legislature generally doesn’t interfere with collective bargaining. That is the governor’s job — the administration’s job, really.“
And what about a two-option scheme in which a minimal plan paid for entirely by the employer, such as the state or school district, and thus the taxpayer, would be offered alongside a maximal, comprehensive plan for which the employee paid the additional premium?
Interviewees saw clear defects in this idea.
“In the past, we’ve had our benefits consultants give some projections along those lines,“ said DHR’s Collins. “The premium savings wasn’t enough to entice people onto the lesser coverage.
“If the minimal plan were offered as an alternative,“ he added, “I think the ultimate fear is … that we’d be using the alternate plan as a stepping stone to getting rid of the better plan. I would think that the negotiation would be to ensure that the stronger coverage would remain.
Collins said a main reason people seek employment with the state is the comprehensive health coverage.
“You generally don’t get into public work for the salary,“ he said. “One thing you do get into public work for is the benefits.“
“There are different ways of approaching health care,“ he concluded. “Some employers and plans say, ’Do you need this?’ and if not, you don’t get it. The other way is to remove barriers to care, and hopefully you’ll be better off, health-wise.“
It’s easy to say that solving the healthcare cost dilemma is someone else’s responsibility, since there are so many moving parts in the mind-numbing complex that is the U.S. health care system.
Asked for his ideas on how best to rein in health care costs generally, CPSEHB’s Campbell pointed first to a federal initiative championed by U.S. Sen. Bernie Sanders (I-Vermont). Vermont-NEA, Campbell said, “has been on record for several years in support of Sen. Sanders’ proposal for ’Medicare for All,’ his popular plan for a national health care system.“
Sanders first introduced Medicare for All legislation in the US Senate in 2017. But the idea goes back a lot further: Theodore Roosevelt, as a presidential candidate, endorsed the concept of national health insurance in 1912. The feds, in other words, have yet to make universal healthcare coverage the law.
Mark Koenig, a board member at Addison Northwest School District and co-chair alongside Campbell on the Commission on Public School Employee Health Benefits, told VermontBiz that he and his fellow negotiators are “just dealing with the cost share of the price of an existing product; actual health care costs are outside of our control. As the commission takes the next two years to seek more sustainable and cost-effective benefits, we’re working with VEHI, legislative bodies, the Green Mountain Care Board — anyone we can talk with.“
But if the past is any indication, a remedy for stratospheric health care costs looks exceedingly difficult in Vermont.
Ours is one of the healthiest states in the union, but that comes at the expense of continual expansion of a health care system.
The persistent deferral of hard decisions about cost control makes the goal of affordable health care, however desirable, look like the ever-receding rainbow. Too many forces seem to get in the way, and it may remain for the Green Mountain State’s Legislature not necessarily to resolve the dilemma but to least play an impelling role in that resolution.
That returns the matter to the political realm. Asked for his suggestions for lowering costs, particularly in the school sector, Koenig was at a loss.
“I don’t have an answer. That’s why we decided to put a hold on our negotiations for two years… I wish we could just wave a wand, but it’s not that easy. We have a governor and a Legislature that are opposed to each other and don’t see eye to eye.“
Some legislators are left nonplussed.
In an email to constituents, state Rep. Anne Donahue (R-Northfield-Berlin), ranking member of the House Human Services Committee, commented thus on the Yield Bill and its relegation of the dilemma to a new commission:
“By some counts, we’ve done 38 studies of the education funding system since 2000, with lots of promises but no resulting significant action, despite broad recognition of the need for structural reform.“
Ultimately the sphere of action entails what might be viewed as entrenched aspects of our national life — the resistance of those who might have to relinquish “platinum“ plans, the unwillingness of pharmaceutical companies to relinquish profits and a statutory system that equates very expensive plans with political and social goals.
As of 2022, the upshot was a cost of $12,555 to provide health care for each resident of the United States annually. That’s about 50% more than in the second-most expensive country, Norway, and about twice what Canadians pay.
It may seem simple enough to mimic the single-payer system developed by our neighbor to the north, where, furthermore, the life expectancy exceeds ours. But even our federal government, although it has far more power to reshape the health care market than tiny Vermont does, the same inertial forces — the Gordian knot that the status quo has become — enter the equation. It is in that daunting context that the battle for effective, affordable health care will be won or lost.
C.B. Hall is a freelance writer from southern Vermont.
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