Green Mountain Care Board chart from March 12, 2025, shows nine hospitals reported negative operating margin in FY2023, six in FY2024 and nine so far in FY2025.
by Timothy McQuiston, Vermont Business Magazine Blue Cross Vermont CEO Don George sent a letter in mid-January to key healthcare stakeholders discussing the dire situation of Blue Cross Vermont in particular and the state's healthcare industry in general. On Wednesday, March 26, the Green Mountain Care Board will meet, and likely vote on, FY26 Hospital Budget Guidance. Earlier this month, a staff presentation by the GMCB noted how most of the hospitals are losing money so far this year.
BlueCross BlueShield of Vermont has reported that it lost over $62 million in 2024, as health care expenses rose more than 15% compared to the prior year. BCBSVT lost $24 million in 2023, $46 million in 2022, and $17 million in 2021.
It’s the fourth year in a row expenses from patient claims exceeded income from premiums for the insurer, BCBSVT stated. Blue Cross Vermont covers over 230,000 Vermonters.
In his letter below, George notes how the Blue Cross Vermont reserves have lost $100 million in member reserves in five of the last six years and last October was the worst month ever.
Last December, AM Best downgraded Blue Cross VT's credit rating, citing many of the issues George also describes. "AM Best has downgraded the Financial Strength Rating to C++ (Marginal) from B (Fair) and the Long-Term Issuer Credit Ratings to “b+” (Marginal) from “bb” (Fair) of Blue Cross and Blue Shield of Vermont (BCBSVT) and its subsidiary, The Vermont Health Plan, LLC, collectively known as Blue Cross and Blue Shield of VT Group (BCBSVT Group). In addition, AM Best has maintained the under review with negative implication status for these Credit Ratings (ratings).
"The ratings reflect BCBSVT Group’s balance sheet strength, which AM Best assesses as weak, as well as its marginal operating performance, limited business profile and marginal enterprise risk management.
"The rating downgrades are attributed to a significant decline in the level of risk-adjusted capitalization and the group’s limited business profile." (see full AM Best report below).
Since he sent this letter, George also has announced his retirement after 16 years as the CEO, effective at the end of this year.
Don George | President and CEO
Blue Cross and Blue Shield of Vermont
Dear Colleagues and Community Leaders,
With healthcare costs surging at an unprecedented pace, 2025 will be a difficult yet critical year for our healthcare system in Vermont. Affording premiums and expenses for medical care and pharmaceuticals has become a hardship for many Vermonters and local businesses. Over the past several years, those affordability challenges have grown at a startling rate. They now threaten the viability of our entire healthcare system and are challenging our economy. It will take focus and cooperation from state government and all healthcare leaders in Vermont to create meaningful and lasting change.
I want to assure you: Despite the serious financial situation facing Blue Cross and Blue Shield of Vermont (Blue Cross VT), we are prepared to help address these issues – backed by hundreds of nonprofit, municipal and small business employers and more than 200,000 members – so that every Vermonter can get the care they need. We will be at the table, providing information and expertise, with a commitment to Vermonters that won’t stop until the issue of affordable healthcare is addressed.
Affordability Challenges: The Why
Healthcare costs charged to commercial payers in Vermont are growing at an astounding rate, with claims paid for Blue Cross VT members increasing by 17% per year since 2020. As a direct result of escalating prices for medical services and pharmaceuticals, Vermont’s commercial healthcare premiums – already high and growing at an unsustainable rate – are not covering the cost of care. For the past several years, Blue Cross VT spent more on healthcare than we brought in, forcing our use of member reserves to bridge the gap. Member reserves exist for precisely this reason, but the extreme and lengthy cost surge has resulted in our reserves falling to a concerning level.
In collaboration with the Department of Financial Regulation, we developed and implemented a multiphase plan to maintain our financial stability and return our reserves to an adequate level. The plan is strong, and I am confident we will succeed. However, until Vermont’s healthcare leaders come together to address our state’s soaring costs head-on, premiums will continue to rise, more Vermonters will lose coverage, and the fabric of our healthcare system will continue to fray.
Affordability Challenges: How Did We Get Here?
Vermont’s commercial cost of care greatly exceeds that of the rest of the nation. Blue Cross VT’s spend is 33.5% higher than the average for Blue Cross® and Blue Shield® plans in the Northeast and 42.7% higher than the national average. Why? Charges from Vermont hospitals and healthcare system account for most of the difference.
- Although it is easy to dismiss Vermont’s higher costs by citing our aging demographics, national Blue Cross and Blue Shield comparative data shows our state’s older population is relatively healthy and only accounts for a portion of this excessive cost. When the Northeast benchmark is adjusted to reflect Vermont’s demographics, Vermont’s healthcare costs still exceed other Northeastern states by 26%. Vermont’s healthcare affordability issue does not stem from the age or health of our people but our disproportionate healthcare costs. Prices at our local hospitals and healthcare system are among the highest nationally in nearly every comparative data set.
- New therapies and medications also fuel hospital cost growth. These include the rising use of injections and infusions in the outpatient setting; new, highly effective cancer treatments; and an evolving mix of specialty medications with extraordinary prices, such as GLP-1s for weight loss and diabetes. Our members need access to these treatments, but at a price we all can afford.
Blue Cross VT’s financial situation developed over many years, driven by this cost surge and a history of inadequate funding by the GMCB. Together, this has led to $100 million in member reserves losses in five of the last six years. The cost surge was unrelenting through 2024, culminating in a $13.6 million loss for Blue Cross VT in October 2024 – the highest single month for paid claims in our history. The last five years have shown in alarming fashion that merely cutting premiums does not result in either increased affordability or healthcare cost containment.
Affordability Challenges: Protecting Our Members
Blue Cross VT is actively engaged in a multiphase plan with both short- and long-term actions to ensure our financial stability. It is our fiduciary responsibility to protect our members’ access to care. We are a highly efficient health plan with our administrative expenses at 6.2% of premiums, among the lowest for health plans nationally. Nonetheless, we owe it to our members to do everything we can to minimize the expenses of running our organization. In the near term, we have reduced administrative spending by suspending marketing and advertising, instituting a more restrictive hiring process, and cutting back on additional projects while continuing to deliver our core services for customers and members. Administrative cuts, however, cannot solve our current financial situation or that of our state’s healthcare system. Only by reducing and managing surging medical costs can we mitigate the burden and ensure Vermonters the vital option of a local nonprofit health plan.
Affordability Challenges: We Must Work Together
Our healthcare system is in crisis and these costs are undermining our economic future. We must set aside self-interest and work together – government leaders, healthcare providers, health plans, businesses and employers – to reduce costs in the short term and deliver systematic changes that will offer Vermonters access to affordable, high-quality healthcare services. It’s more important now than ever.
Sincerely,
Don
AM Best Downgrades Credit Ratings of Blue Cross and Blue Shield of Vermont and Its Subsidiary; Maintains Under Review With Negative Implications Status
OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has downgraded the Financial Strength Rating to C++ (Marginal) from B (Fair) and the Long-Term Issuer Credit Ratings to “b+” (Marginal) from “bb” (Fair) of Blue Cross and Blue Shield of Vermont (BCBSVT) and its subsidiary, The Vermont Health Plan, LLC, collectively known as Blue Cross and Blue Shield of VT Group (BCBSVT Group). In addition, AM Best has maintained the under review with negative implication status for these Credit Ratings (ratings).
The ratings reflect BCBSVT Group’s balance sheet strength, which AM Best assesses as weak, as well as its marginal operating performance, limited business profile and marginal enterprise risk management.
The rating downgrades are attributed to a significant decline in the level of risk-adjusted capitalization and the group’s limited business profile. The risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), through the third quarter of 2024, has deteriorated to the very weak assessment. The decline through the third quarter is being driven by a higher-than-projected net loss due mainly to continued elevated medical and pharmacy claims costs and worsening utilization trends that drove increased underwriting and net losses. This follows a significant decline in capital at year-end 2023 and second-quarter 2024, which resulted in BCBSVT being placed under a capital restoration plan by Vermont’s Department of Financial Regulation in July 2024. Additionally, BCBSVT continues to evaluate potential options for capital support to bolster its risk-adjusted capital and has taken significant rate action for 2025 as part of its corrective action plan.
The limited business profile reflects the challenging regulatory environment in Vermont, with the Department of Financial Regulation overseeing regulatory capital while the Vermont Green Mountain Care Board has oversight on rate increases. The objectives of the two regulatory authorities have a history of not being aligned, which has hindered BCBSVT Group’s ability to obtain requested rate increases. BCBSVT Group maintains a large market share in Vermont where a large majority of businesses are small in scale and maintains a large presence in the ACA marketplace. However, the group faces limited competition in these markets due to few companies participating.
The under review with negative implications status on BCBSVT Group’s ratings reflects AM Best’s concerns that underwriting and net losses in the fourth quarter of 2024 could worsen and further erode absolute and risk-adjusted capitalization. The ratings will remain under review while AM Best has further discussions with BCBSVT management and monitors the status of the organization’s balance sheet strength and operating performance for full-year 2024 and as it implements corrective measures for 2025.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
December 19, 2024. Copyright © 2024 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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