Over the past several months, Vermont lawmakers and state officials have been preoccupied with the fate of the state’s largest health insurance company. 

Blue Cross Blue Shield of Vermont, the Vermont-based member of the nationwide health insurance organization, is also the only health insurance company based in Vermont. The nonprofit covers roughly a third of the state’s population across all its plans. 

Now, with its reserves drained by a multi-year surge in insurance claims, the nonprofit is facing a financial crisis with little recent precedent. As Blue Cross Blue Shield prepares to ask state regulators to increase premiums in 2026, the financial health of the company has alarmed policymakers and prompted a scramble to shore up the company.

“If Blue Cross cannot pay the claims, the system fails,” Owen Foster, the chair of the Green Mountain Care Board, a key health care regulator, told lawmakers last month. 

Federally qualified health centers, independent clinics, mental health agencies, possibly even hospitals — “if they don’t get paid, they close their doors,” Foster said.  

The financial headwinds facing Blue Cross Blue Shield are familiar to many in Vermont’s health system. In the wake of the Covid-19 pandemic, hospitals and other providers have seen a surge of patients, many presenting with more complex conditions. What’s more, the price of care — particularly drugs, and more particularly specialty drugs, like popular weight-loss medications known as GLP-1s — has increased precipitously in the past few years. 

That’s led to unexpected increases in health care expenditures across the state. In both 2023 and 2024, for example, the University of Vermont Medical Center exceeded its budgets by tens of millions of dollars — overages that, hospital administrators said, were caused by a massive surge in patients needing more care.

That surge has, in turn, drained Blue Cross Blue Shield’s cash reserves. From 2021 through the end of 2024, Blue Cross Blue Shield has lost nearly $152 million, according to data the insurer presented to legislators earlier this month. Last year alone, Blue Cross lost $62.1 million.

In 2019, the insurer had $133.5 million in the bank. At the end of 2024, Blue Cross Blue Shield had just $58 million — and pays out an average of $35 million a week in claims.

Last year, credit rating agency A.M. Best downgraded Blue Cross Blue Shield’s rating twice, bringing its score from B++ to C++. That’s moved the insurer’s rating from “good” to “marginal” in a matter of less than six months.

“I’ve lived and worked in Vermont for 45 years,” Don George, the CEO of Blue Cross Blue Shield, told lawmakers in the Senate Committee on Health and Welfare last month. “And I’ve just never seen anything remotely close to what we’re going through now.” 

‘We’re fortunate’

A significant chunk of those losses have come from Blue Cross Blue Shield’s Medicare Advantage plans, Vermont Blue Advantage. From 2019 through 2023, Blue Cross Blue Shield lost $43.4 million on those plans, according to financial records. Roughly 35,000 Vermonters are on Blue Cross Blue Shield Medicare Advantage plans, Sara Teachout, a spokesperson for the insurer, said. 

Some of those early losses were startup costs ahead of the plans’ rollout in 2021, Teachout said. Once they hit the market, the plans continued to lose money — $11.5 million in 2022 and $22.5 million in 2023 — along with the rest of the insurer’s portfolio, records show.  

Those deficits are due to the same factors affecting the rest of Blue Cross Blue Shield’s generally, Teachout said: a rise in residents needing care and increasing costs for that care.

Those losses “are proportionate to the losses in our other lines of businesses that are due to the cost surge,” she said. 

To shield itself from those losses, Blue Cross Blue Shield of Vermont has almost entirely unloaded its Medicare Advantage business onto Blue Cross Blue Shield of Michigan, an affiliate nonprofit insurer. It’s also taken out a $30 million loan from Blue Cross Blue Shield of Michigan. 

Because of its shaky financial footing, Blue Cross Blue Shield of Vermont is paying 8% interest on that Michigan loan. George, the CEO, said in an interview that the insurer was lucky to have even gotten a loan in the first place.

“The reality is, we would likely — under those circumstances and that risk — not be able to find anyone that would loan Blue Cross Blue Shield of Vermont (money),” he said. “So we’re fortunate to have Michigan, and that’s how we come up with that interest rate.”

To shore up its finances, the insurer has also held off hiring roughly for 30 positions and has embarked on a “comprehensive capital recovery plan” with the Department of Financial Regulation, according to George. 

‘The number one cost driver’

As part of an annual regulatory process, Blue Cross Blue Shield is preparing to request increases to its insurance premiums later this month — increases that are expected to be large. Last year, the insurer raised premiums for individual and small group plans on the state’s health insurance marketplace by roughly 20%. 

For 2026, “Given the pace of medical and pharmacy costs and the utilization that we saw right through to the end of 2024, I would expect increases not unlike what we’ve recently seen in the past,” Ruth Greene, the insurer’s chief financial officer, said in March. 

Those increases impact not only individual Vermonters’ insurance costs — already some of the highest in the nation — but also their taxes. Most municipalities buy small group insurance plans on the state health insurance market, according to Ted Brady, the executive director of the Vermont League of Cities and Towns. 

Prior to last year’s premium increases, roughly 80% of municipal employees were insured with Blue Cross Blue Shield, Brady said, although he now expects that many municipalities have switched to MVP, the other insurer that sells on the marketplace.

“Health insurance is the number one cost driver for municipalities right now,” he said.

School and state employees are also insured on Blue Cross plans, but are on a different type of plan known as self-funded plans. Although those organizations have also seen significant premium increases as health care costs rise, members contribute proportionally less to Blue Cross’ reserves — meaning they are more insulated from the insurer’s financial struggles, administrators at those organizations say. 

Still, increasing insurance premiums are “a tremendous economic strain on every part of Vermont,” Vermont’s Chief Health Care Advocate Mike Fisher told lawmakers last month. 

‘Acute and immediate threat’

Meanwhile, policymakers and legislators are taking steps on their own. In March, the Green Mountain Care Board, a key health care regulator, announced a deal with the University of Vermont Health Network that will deliver $12 million in hospital funds to Blue Cross Blue Shield of Vermont. 

Lawmakers are also hashing out the details of a bill that would allow for emergency action to help health insurers in financial crisis. That bill, H. 482, would allow the Green Mountain Care Board to reduce the reimbursement rates paid to a Vermont hospital if the insurer in question faces “an acute and immediate threat to its solvency.” 

Such a rate reduction would only be allowed if the hospital is part of a financially stable network, according to the bill language. 

The proposed legislation passed out of the House in March. A key legislative committee, the Senate Health and Welfare Committee, is scheduled to vote on advancing it Friday. 

Meanwhile, in the other chamber, the House’s health committee is looking to address the problem of rising costs closer to their source — at hospitals and other providers. 

A sprawling bill, S.126, would implement a new payment model known as reference-based pricing, in which hospital charges are pegged to Medicare reimbursement rates, to go into effect no later than 2027. The bill would also direct the Agency of Human Services to work with providers to reduce health care spending by 5% “for hospital fiscal year 2026,” which begins October 1.

That bill passed the Senate in March, and lawmakers in the House Health Care Committee are working on amendments this week. 

“There’s a lot of work that has to be done,” Sen. Ginny Lyons, D-Chittenden Southeast, the chair of the Senate Committee on Health and Welfare, said of her committee’s legislation last month. “We can’t let Blue Cross and Blue Shield go under.”