Just prior to adjourning this spring, the Vermont legislature passed two bills that are aimed at cutting healthcare costs in Vermont.

These bills may have a significant impact on the cost of health insurance in Vermont.

So, what do employers need to know? Read on for a quick summary of this legislation and how it might affect health costs in the short and long term.

Vermont Bills H.266 and S.126.

Both pieces of legislation represent significant steps in Vermont’s ongoing efforts to control healthcare costs, improve transparency, and enhance access to quality care. Below we’ve outlined the anticipated short-term and long-term impacts these laws may have on health plans, focusing on plan costs, coverage, and changes in provider and drug pricing.

Short-Term Impacts (Next 12–24 Months):

1. Plan Costs:

• H.266 introduces a cap on the price hospitals can charge for physician-administered drugs (such as infusions and injections) in outpatient settings, limiting charges to 120% of the average sales price. This is expected to reduce immediate claims costs for these high-cost drugs, which may help moderate premium increases or even lower plan expenses for affected treatments.
• S.126’s initial implementation will focus on establishing reference-based pricing (RBP) for certain hospital services and expanding oversight of hospital budgets. This could begin to curb excessive hospital charges, with potential for modest savings reflected in plan costs as early as the next plan year. Reference-based pricing refers to reimbursing the hospital a percentage of their Medicare reimbursement, instead of whatever the hospital is actually charging for the service.

2. Coverage:

• No immediate reductions in covered services are anticipated. However, increased transparency and cost controls may prompt some hospitals to review their service offerings, particularly for high-cost drugs and procedures.
• Members may see improved access to primary care and telehealth services as S.126 prioritizes investment in these areas.

3. Provider and Drug Pricing:

• Hospitals will be required to comply with new drug pricing caps (H.266) and may adjust their billing practices accordingly. This should result in lower out-of-pocket costs for members receiving physician-administered drugs in hospital outpatient settings.
• Reference-based pricing (S.126) may begin to influence hospital reimbursement rates, but significant changes will likely phase in over time.

Long-Term Impacts (2+ Years):

1. Plan Costs:

• S.126’s Reference-Based Pricing model and expanded hospital budget oversight are designed to slow the growth of hospital spending, which is a major driver of premium increases. Over time, this could translate to more stable or even reduced premium trends for Vermont health plans.
• The cumulative effect of drug pricing caps and hospital payment reforms is expected to yield ongoing savings for both employers and employees.

2. Coverage:

• Enhanced investment in primary care, telehealth, and workforce development (S.126) may expand the range and accessibility of covered services, particularly in rural or underserved areas.
• There is a possibility that some hospitals may adjust their service mix or network participation in response to tighter reimbursement, but the legislation includes hardship provisions to help maintain access.

One additional thing to consider is the impact this will have on Vermont’s small, rural hospitals which are already struggling greatly. So if what hospitals can charge is capped, we could see more hospital consolidation and/or hospitals closing or limiting services around the state. These bills are “bad news” for hospitals and adjacent entities such as home health care. They are “good news” for Blue Cross, MVP, and Cigna who conceivably won’t have to reimburse as much for services received in Vermont. The legislature passed these bills in response to the financial troubles of Blue Cross Blue Shield of Vermont, but it remains to be seen what the unintended consequences might be.

Don’t navigate these complex changes alone.
Connect with OneDigital’s team of experts for personalized guidance on how these new laws may impact your organization’s health plans. We’ll help you understand the implications, develop cost-management strategies, and ensure you continue to offer quality coverage to your employees.

Need additional guidance? Contact us today to protect your business with a fully compliant health plan!