Why do only 2 health insurers sell plans on Vermont’s exchange?

Over the weekend, Andrew Garland, an executive at BlueCross and BlueShield of Vermont, found himself at Home Depot staring down the array of tools that “all seemed to do the same thing,” he said. DeWalt? Milwaukee? 

It’s a version of the choice the more than 60,000 Vermonters who buy their insurance on the state’s Affordable Care Act marketplace are making this fall, as open enrollment gets underway. Vermonters have until Dec. 28 to sign up for 2027 plans and until Dec. 15 to sign up for coverage that begins on Jan. 1. Though the marketplace hosts an array of options, they notably come from only two insurers: BlueCross BlueShield of Vermont and MVP Health Care.

So why is that? And how unusual is Vermont in having so few insurers in the marketplace? Is the fact that there are so few marketplace insurers what drives the high premiums Vermonters pay for marketplace plans? And is it really such a bad thing to have so few options?

For a state that prides itself on its exceptions from the norm, Vermont is not alone in having only two insurers who chose to do business on the marketplace here. Seven other states, plus Washington D.C., have only two insurers participating in the individual health insurance marketplace, according to the health policy group KFF.

Still, the Green Mountain state remains exceptional in other ways: experts point to a handful of uniquely Vermont conditions that make the marketplace undesirable for new entrants. Namely, the extremely small population of the state, the regional monopolies of the state’s hospitals and the high costs of care. 

“I think number one is the size of our market,” said Kaj Samsom, the commissioner of the Department of Financial Regulation, which regulates health insurers in Vermont. 

“Insurance is a game of large numbers, and we don’t have those numbers,” he said. 

BlueCross BlueShield of Vermont CEO Beth Roberts agrees: “When you look at the size of our market here in Vermont — of individuals and small groups who purchase insurance — the market is small. Two carriers is likely the exact right size for a small market,” she said.  

Vermont’s marketplace, Vermont Health Connect, is the state-managed exchange for people to buy health coverage even if they do not qualify for federal Medicare (which is for those over 65 or with certain health conditions) or for the state-federal Medicaid (which is for certain low income levels) or have an employer-sponsored plan available to them. 

A smaller market is a more volatile one, where only a handful of big claims can destabilize just how much an insurer needs to pay out vs. how much it can keep in reserves, as was the case in 2024 when BlueCross BlueShield of Vermont saw claims significantly higher than expected and paying them out dug deep into the insurer’s reserves. 

Insurers talk about risk in terms of the pool —  who pays premiums into it and who needs to pull money out of it for care. The larger the pool, the more diluted the risk. 

“When you fragment it too many times, it actually doesn’t help stabilize the pool. To get to a stabilized pool, each insurer has to have a critical mass of people in that pool to stabilize those premiums. And so, to just think about carving that up further amongst more and more payers… it goes out of line with the market size,” Roberts said. 

Though insurers and regulators have actuaries to predict what a given year’s claims might look like and how much revenue an insurer needs to raise through its premiums, predicting health outcomes “has an inherent amount of uncertainty that is hard to to quantify,” Samsom said.

And despite the best laid plans, marketplace plans historically lose money. For every dollar marketplace insurers collect in revenue, they lose a dollar and one cent paying out claims. 

“There’s very little opportunity to even break even,” Samsom said, let alone for an insurer to add to its reserves. 

All of this comes down to the cost of the claims the insurers have to pay out, said Owen Foster, who chairs the Green Mountain Care Board, which also regulates the ACA marketplace plans. The way he sees it, three main factors drive the high charge to insurers: that’s how much care people use, where they get the care — for instance, if they get an MRI in a less expensive, standalone imaging clinic or a more pricey hospital — and just how much the price of the service actually is. 

“If they want to make a margin, the insurance companies need enough money at the end of the  year after they pay all the claims to have some money in the bank,” Foster said. Historically, they have not.

In most of the state, people have one real option for local hospital care. These “regional monopolies” over care, as Samsom calls them, have limited insurers’ ability to negotiate on how much a hospital charges them. And, at the same time, Vermont has few options for less expensive care outside of a hospital — such as an independent imaging center or stand-alone surgical center. 

“The cost of care just eats up so much of the available resources, right?” Garland, the BlueCross executive, said. “We find ourselves just scrapping for any strategies we can to help bring that cost down or find ways to cover more services that folks need. There is no margin for margin. The cost of care is just demanding so much money right now.”

Insurers in Vermont have network adequacy requirements that mandate them to include local providers, which, with many regions having only one main hospital, means insurers cannot simply walk away from a hospital that does not want to negotiate on prices.

“In another state they could,” Mary Block, the Department of Financial Regulation’s deputy commissioner, said, explaining a situation where a city might have more than one major hospital. “That leverage doesn’t exist for the insurers (here).” 

Absent market pressure, the Green Mountain Care Board, which sets marketplace premium increases, fills the void.

“What I think the care board has effectively done in the last two (or) three (years) is put some pretty clear motivation on the hospitals to think differently about negotiations,” Samsom said. He described the effective pressure that the care board has put on insurers to pull down their premiums (and on hospitals to pull down their prices) which has contributed to more robust contract negotiations, such as the contract BlueCross BlueShield and University of Vermont Health inked for 2026 that was credited as one of the driving factors behind its significantly leaner budget for this coming fiscal year. 

Still, Vermont has some of the highest premiums in the nation for younger people purchasing plans on the Affordable Care Act marketplace, according to a KFF comparison of plans for 40-year-olds across the country. 

Yet, as the rest of the country watches steep increases in premiums — with the national average rate for a benchmark marketplace plan increasing 13% for 2027 and 26% for 2026 — Vermont has drastically curbed increases for its marketplace plans, with BlueCross BlueShield of Vermont’s individual plans set to increase 2.2% and MVP’s increasing 3.9% for 2027. This year marks some of the smallest increases in premiums that Vermont’s marketplace has seen. But monthly base rates — without any federal or state subsidy assistance — range from over $800 for a bronze plan to nearly $16,000 for a silver plan (which in Vermont are more expensive than gold-rated plans).

“We’re nothing but a proxy for ensuring Vermonters can afford healthcare,” Foster said. “If they want to say the regulatory pressure is too much, I think what they’re really saying is Vermonters should be paying us more.”

Regulation is a fine balance, though, Block said. Vermont is “unlike any other state,” in how much regulation its marketplace insurers are subject to, she said. It can act to further dissuade new insurers from entering Vermont’s market. It would, Roberts acknowledges, be much less administrative time and expense to have to report to one state regulator than both the care board and the Department of Financial Regulation.

But the regulation alone is not what’s driving insurers’ losses in an expensive healthcare environment.  

“I don’t want to sit here and blame the care board and their rate reductions,” Samsom said. “Even without the pressure from the board reductions, they still lose money.”  

Competition of the two insurers does also work to drive some price reductions, Samsom added. It can act as a disincentive for them to buffer their rate too much and can drive each insurer to negotiate a better contract with the hospital, Samsom added.   

As the insurer’s actuaries build their rate, they’re thinking how much do we expect to pay for care? Samsom explained. It’s a calculation of utilization and price — and the insurer has more control over prices. 

“Price is what you’re negotiating with the providers on (every year) and you want to do better in that negotiation than your competitor,” he said.

Without that competition, Samsom warns that too much of that volatility inherent to insurance would concentrate into one insurer. Though there is no indication that MVP, nor BlueCross, are going anywhere, having only one insurer on the marketplace would introduce new vulnerabilities. 

“Their share would increase but their vulnerability to financial distress would go up quite dramatically,” he said, “Given how volatile that market is, they are doubly at risk of the type of claim surge and solvency concerns we saw two to three years ago.”

Read the story on VTDigger here: Why do only 2 health insurers sell plans on Vermont’s exchange?.