Last week, two major Vermont health care providers asked state regulators to allow significant increases in service charges on commercial insurers.
After projecting a $7.6 million operating loss from COVID-19 at the end of the current fiscal year, Rutland Regional Medical Center, the state’s second-largest hospital, asked the Green Mountain Care Board for a 9% increase to insurance service charges.
On the heels of that request, The University of Vermont Health Network, the largest and most influential system in the state, asked regulators Friday for a 10% increase for two of its hospitals — UVM Medical Center in Burlington and Central Vermont Medical Center in Berlin, which together expect a $44 million deficit this year.
Together, the three hospitals accounted for two-thirds of health care spending in the state in 2021, according to their budget filings to the Green Mountain Care Board. UVM Health Network’s hospitals spend the bulk of that money.
If the Green Mountain Care Board approves these requests, private insurers — and the people they cover — will pay.
Here’s how it works: Hospitals can balance their budgets by raising charges wherever possible. The federal government sets the rates for Medicare and Medicaid, which leaves only one option — charging more of private insurers. Private insurers would, in turn, offset some of that cost by charging patients higher premiums next year.
The Green Mountain Care Board is expected to vote Wednesday on Rutland Regional’s rate increase. The UVM Health Network’s requests are not on the schedule yet.
Chances are good that board members would OK some increase. The alternative, Rutland Regional executives said last week, would be painful cuts in essential services.
As Kevin Mullin, chair of the Green Mountain Care Board, put it in an interview last week, consumers can expect some pain in the form of ballooning premiums.
“I don’t know how we get out of this without pain,” he said.
Vermont’s remaining hospitals have until May 1 to request budget adjustments of their own, under Green Mountain Care Board rules. Given COVID-19’s financial impact on virtually all hospitals in the state, other budget adjustment requests are likely.
For all of its regulatory powers, the Green Mountain Care Board seems to side with hospitals a lot. Board members tend to ask difficult questions about cost and access in hearings, but its members often favor symbolic regulation in the form of modest cuts in budgets and rates.
At last year’s budget hearings, for example, board members lamented rising costs but allowed hospitals to grow a collective 13.1%, more than triple the 3.5% benchmark the board normally allows.
Citing pandemic pressures on the health care system, the board also waived rate enforcement for the past two years. And last year, after significant pushback, the Green Mountain Care Board softened its stance on a project involving the long-term financial solvency of hospitals.
Vermont is a tiny state. Its private insurance pool is minuscule. Some 329,000 Vermonters carry private insurance, compared with more than 136,000 Medicaid enrollees and roughly 121,000 Medicare enrollees. That means that relatively modest swings in hospital charges could result in drastic premium increases for most private insurance consumers. Exactly who is affected and by how much depends on the insurer, the type of policy, and a complicated array of tax credits and regulations.
If hospitals raise their rates too much, there’s always a chance that insurers would decline the increase and threaten to exclude hospitals from their preferred provider list, as is the case with The University of Vermont Health Network and insurance giant UnitedHealthcare. As of Tuesday, a network spokesperson said, the parties had yet to reach an agreement.
Not surprisingly, insurers oppose raising the rates. At last week’s Rutland Regional hearing, Sara Teachout, spokesperson for BlueCross BlueShield of Vermont, said the Green Mountain Care Board needs “to hold hospitals accountable for meeting their annual budgets.”
“No one is emerging from the pandemic unscathed,” she said, and Vermont’s hospitals should not be the exception.
The final side effect to ballooning insurance rates is perhaps the worst. If the Green Mountain Care Board approves significant commercial rate increases, some people may drop their health insurance altogether. Without insurance, that would mean little to no medical care. Those Vermonters who remained in the commercial insurance pool would face even bigger rate increases as a result.
Insurers call this phenomenon a “death spiral,” and it’s the very thing regulation is supposed to curtail. Vermont is arguably one of the most tightly regulated states in the nation when it comes to health care, but the pandemic’s ballooning health care costs appear to dictate much of the state’s trajectory.
As Mullin sees it, the board and lawmakers share the responsibility of keeping health care costs in check. The growing crisis in the state’s health care would likely spur some legislative action to support the market.
“It takes a crisis for people to actually do something,” he said. “And so I think things will be done this year. I think that the legislation is finally moving forward.”
It may not come quickly enough for some Vermonters.