Vermont Legislature SmartTranscripts:

[Robin Scheu (Chair)]: You don't practice. Good morning, everybody. This is the House Appropriations Committee. It is Wednesday, 01/14/2026, and it's 09:30 in the morning. And we are going to talk about health insurer sustainability, our first topic of the day. And so we have Kai Sampson and Mary Blob from DFR. Since you haven't been here for a while, Kai, welcome, and we will introduce ourselves.

[David Yacovone (Member)]: Good morning. I'm David Yacovone. I represent the Lamoille Washington.

[John Kascenska (Member)]: Welcome, John Kascenska from Burke, and I represent Essex Caledonia District.

[Michael Nigro (Member)]: Hi, Nigro, represent Bennington. Stevens, I represent Washington, Chittenden, and one which is Waterbury, Bolton, Huntington, and Buells Four.

[Mary Block (Deputy Commissioner of Insurance, DFR)]: I'm Marty Feltus from London,

[Robin Scheu (Chair)]: I represent Caledonia 3. Robin Scheu from Middlebury, Tiffany Bluemle from South End Of Burlington. Lamoille Rush, Highgate Franklin, Berkshire, Richford.

[John Kascenska (Member)]: Good morning, I'm Michael Mrowicki from Southeast Vermont, Windham County. I represent Windham Four District Of Putney, Dumberston.

[Eileen Dickinson (Member)]: Hi, Eileen Dickinson. I represent St. Alvin's Town.

[Robin Scheu (Chair)]: And then coming in a little later is Trevor Squirrell from Jerichoille and Andrean. The crew, and please introduce yourselves and take it away.

[Kaj Samsom (Commissioner of DFR)]: Yeah. Kai Sampson, commissioner of DFR. And by way of background, I've been out of DFR for eight years. But prior to that, I was deputy commissioner in the insurance division. Of course, DFR has insurance banking securities and captive divisions. I served as tax commissioner for almost three years for governor Scott when he was first elected, then I went worked in the private sector for about six years and was attracted back by this open commissioner job when commissioner Gaffney retired. You're probably familiar with deputy Emily Brown. She went to the Green Mountain Care Board, and Mary Block was working in the division at the time with lots of experience in insurance and regulation. And so it was an easy pick for my deputy.

[Mary Block (Deputy Commissioner of Insurance, DFR)]: Mary Block, I'm the Deputy Commissioner of Insurance in the Department of Financial Regulation. As Commissioner said, I've been with the Department for about five years now in the Insurance Division. Prior to that, I spent thirty plus years in the securities and the insurance industry as an attorney, finance officer, and head of investigations.

[John Kascenska (Member)]: So

[Robin Scheu (Chair)]: we have something on our committee page and the handout.

[Eileen Dickinson (Member)]: Doctor. Sabao. You must

[Kaj Samsom (Commissioner of DFR)]: have the Act 68 report.

[John Kascenska (Member)]: Yes.

[Kaj Samsom (Commissioner of DFR)]: So before I jump into kind of answering the question that we were asked to answer with that report, is it useful to have a background at all in our role in okay. Say yes before I even finish the question. So perfect. So, know, DFR, at least the insurance division, regulates, all forms of insurance and even things you might call quasi insurance or unique, types of insurance, examples there. And when oh, let me back up to say regulate, that generally includes primarily solvency, consumer protection, and even rates and forms. Forms is the term we use for policies. So an auto insurance or homeowners insurance policy before it can be marketed and sold in Vermont has to go through deputy blocks shop for review of compliance with with our law. Of course, we have a consumer protection unit or a consumer services unit that offers help and complaints for all all types of insurance. And we have a market conduct section that essentially does enforcement of insurers that we see have broken the law, treated consumers unfairly, etcetera. And a lot of that comes from the consumer services section. So identifying trends that we get in complaints with a particular insurer or on a particular issue. When it comes to types of insurance, it's really all types of insurance, life insurance, health insurance, title insurance, auto insurance, commercial insurance, workers' comp, etcetera. Of course, health insurance is a little different since the creation of the Green Mountain Care Board, that is the one line of insurance that we do not have rate authority. So while we are responsible for ensuring the solvency and compliance, etcetera, all those other things with Blue Prospect Shield of Vermont, which is our only domestic that's another thing I should say. So we have authority on the license of your big insurers that we could list all the names and all the commercials that we all laugh at. They all have licenses to do business in Vermont. They are in our domestics. Insurance is unique, and that is a state regulated financial service all the way. There is no meaningful federal regulator. That is very different than banking and securities where there's, you know, some state chartered banks and some federally chartered banks and then federal level authority. So there's a lot more overlap or or cooperation between federal and states in securities and banking. In insurance, we are the primary regulator of our domestics and of our markets. Anyone who wants to sell in Vermont, anyone who wants to domicile an insurance company in Vermont, you know them, co op, Vermont Mutual, Union Mutual National Life Group, Blue Cross Blue Shield of Vermont, Concord as an entity in Vermont. I'm missing a few. And then earlier, said kind of the the quasi insurance or for different entities. VHI, Vermont Education Health Insurance or initiative. BLCT? BLCT. Yes. It's good.

[Mary Block (Deputy Commissioner of Insurance, DFR)]: It's good.

[Kaj Samsom (Commissioner of DFR)]: I was looking at you for the eye, the eye.

[Mary Block (Deputy Commissioner of Insurance, DFR)]: Oh, the eye?

[Kaj Samsom (Commissioner of DFR)]: Insurance, I don't know. They essentially pool all the schools together purchase one set of insurance product and a and a third party administrator, in this case Blue Cross Blue Shield. So they're they're enabled in statute VLCT, the Vermont League of Cities and Towns, and VIZBET, Vermont School Boards Insurance Trust are all regulated by us both at the entity level, the rates, and the forms. The latter two, VIZBET and VLCT, allow municipalities and schools to come together to purchase property and casualty insurance. So

[John Kascenska (Member)]: remind me what VIZBID Vermont School Board's Insurance Trust. So that's the school board. Okay.

[Kaj Samsom (Commissioner of DFR)]: And those are all specifically enabled by Vermont statute. Right,

[Robin Scheu (Chair)]: right. I seem to remember that Lynn.

[Eileen Dickinson (Member)]: Okay, when I was on the school board, we had VIZBID. Now we have BIHI. VIZBET is different or it's a continuation or what's the difference?

[Kaj Samsom (Commissioner of DFR)]: Many schools have both. They have VIZBET for health and VIZBET for their property and casualty coverage. Depending on when you were on a school board, we're talking like the eighties. Yeah. Yeah. I believe this bit had a before the creation of V High, I could be wrong on the timing of this or the facts of this. I could be completely wrong, but I believe there was a a moment in time in the eighties or nineties where Bizbit was providing a a health Yes. Yeah. Now it's beehive for health, Bizbit for property casualty.

[Eileen Dickinson (Member)]: Yeah. The other thing that Bizbit was, and a lot of other organizations follow through, like, Chamber of Commerce and others, is it was an association and it functioned that if you didn't have maximum use of it, like school's case, they all had like Blue Cross Blue Shield JY or something, this very expensive Cadillac type. But if it had low usage among its members, each individual school could get a refund back and that would go into a pool they kept that made it possible for them to continue to provide that insurance because they got this refund or rebate back for being healthy. You only needed one person to have a problem to not have that happen. But with the ACA, those associations were eliminated. So the chamber had to give up its insurance. Was that when BIHI was formed? I mean, I'm not sure what the I was out of it for a while. I've been here, but

[David Yacovone (Member)]: I

[Eileen Dickinson (Member)]: But Anyway, the point of it is that other states continue those associations. That wasn't something that ACA did. That's something that Vermont did. Mhmm. New Hampshire continues to happen. It was a favor. It was a cost saving for the employer who then could get passed on to the employee. The AHP question.

[Mary Block (Deputy Commissioner of Insurance, DFR)]: So in the bill, in association health plan, in our bill, there is five five, there is language to loosen up our statutes around association health plans. Part of that is federally governed, so it keeps going back and forth. The Trump one administration loosened them up. The Biden administration tightened them back up again. We presume Trump two will loosen them up again. So we're proposing to make some changes so that if they do, we'll have more flexibility. So if that winds up happening, step two would be for us to loosen up the regulations that go with those. And that would broaden the ability of associations once again to The problem with those, and we'll talk more when we is step by on that they may suck life out of the small group market. So there's pros and cons. And so all of that will get flushed out on May is being discussed.

[Eileen Dickinson (Member)]: Just to follow-up on that, the Chamber of Commerce, which is out of big lots of small businesses and towns everywhere, state who would maybe never be able to afford insurance. Of course, now they're part of whatever we have now, Health Connect. But that association allowed small businesses, very small businesses, to purchase and keep it at a reasonable price. I'm just

[Mary Block (Deputy Commissioner of Insurance, DFR)]: No, think

[Eileen Dickinson (Member)]: that a real loss to the chamber. That was a big source of their income.

[Kaj Samsom (Commissioner of DFR)]: And as well. But no, mean, that is that is the issue that we wanna discuss in May around association health plans.

[Robin Scheu (Chair)]: It's great. And we have one more question and we'll keep going.

[Thomas Stevens (Member)]: Yep. I'm anticipating the rest of some of the rest of your testimony. So when you say that you monitor the health of health of insurance companies, so roughly was in the news quite a bit in 2025, but you don't monitor or you don't have any administrative duties over the rates they charge. Is that right? What, in a general way, using Blue Cross as the example, when Blue Cross signals that they are in trouble, what's your role in not dealing with it?

[Kaj Samsom (Commissioner of DFR)]: Right. So I think you saw a real life example of that last year when that actually happened. So I wasn't here. I started in April. But Mary, Emily, commissioner Gaffney, you know, very quickly on the phone with Blue Cross, on the phone with with Owen at at the care board regarding the 2026 rates sorry, 2025 rates, so in 2024, making sure that, you know, of course, backing up, the care board does the rates for QHP. Blue Cross at that point in time was starting to see a very concerning and costly trend in claims in time that when the 2025 rates, which are filed summer twenty twenty four, were before the care board care board was able to have a different approach on affordability and understand that affordability is one of their charges, but we have an insurer who, if we continue to suppress these rates, we might bring into bankruptcy. In terms of your question specifically about our ability to intervene, it's a good question. It is an awkward situation for me to be responsible for the financial solvency of an insurer, have little or limited control over the primary way that they make money, which is adequate rates with a reasonable amount of profit. So but and then a third kind of layer on this. Nolan put together a white paper study, a briefing paper on risk based capital, which is the metric that all 50 states use to measure very sophisticated and it's very good. It's a it's a well relied upon universally relied upon measure of a company's solvency. It's in our statute as well for all insurance companies. Blue Cross hit an RBC level that gave us authority to demand an action plan from them and how and it's a confidential plan, how they plan to stay solvent and rebuild their surplus. And had things gotten worse fortunately, things got better after that low point, but had they gotten worse, there were they're escalating powers we have in statute ultimately allowing us to take over the company, to take over management of the company as as a department. We didn't get anywhere close to that. But yeah.

[Thomas Stevens (Member)]: So Yes. But so just to follow-up, one of the things that I recall from the press on this was that, well, specifically the reason why they lost a lot of their reserves, but they lost money on a particular product Medicare Advantage. Do you have say over what they choose to offer under these circumstances where you say, hey, this is the losing product right here and that created chaos for people who were on those plans regardless of what we think of them individually. They were there, they were offered, and they lost money for Blue Cross.

[Kaj Samsom (Commissioner of DFR)]: Do you have that? Is that You know, that's really a board and management decision getting into new lines of business. I think the the honest answer to that question is that absent them being in a heightened state of supervision legally from us, it would be hard for us to exercise power directly over their management decisions. However, we also have a lot of other power, so there's a soft type of power where we could be involved and and say, you really wanna do this because there's a bunch of things we could make very difficult for you, you know, but that's so so there's that kind of not direct, but indirect. We've had a great relationship with the company as we do with all our domestic companies. In a situate you're you're right. They lost approximately $50,000,000 on that product, the Advantage product, over the short term that it was available, four or five years, I believe. Five

[Robin Scheu (Chair)]: years, I believe.

[Kaj Samsom (Commissioner of DFR)]: They lost over that same period approximately, I think, million on QHP, the exchange products. Those two things combined were absolutely primary drivers of their solvency issues in '24 '23, '24, 2425. I would say that add we have the power to, let's say, approve or disapprove a new product, etcetera. Well, first of all, and you're probably thinking this, say this, Kai, CMS governs Medicare Advantage, the federal government. We have very little influence there.

[Mary Block (Deputy Commissioner of Insurance, DFR)]: Including rates.

[Kaj Samsom (Commissioner of DFR)]: Yep. So as far as the the adequacy of rates and all that. But I would say even if if we, in statute, had the power to sign off on entering into a new market like that or something, everyone at that point, including national insurers, was you know, they're gonna have projections and decisions to say, look, we're we're able to get more members, spread out our fixed cost, looks like it's gonna be profitable, it has I don't know that we would have intervened as a regulator and then we might have tested their assumptions a little bit. Does that help? Just I'm just

[Thomas Stevens (Member)]: those things hang out there and we get questions about them.

[Mary Block (Deputy Commissioner of Insurance, DFR)]: Unfortunately, the Medicare Advantage market is a very bad example of anything. It's bad all over the country. Multiple insurers have pulled out of the business. We now only have one insurer in a limited number of counties in New Vermont that's offering Medicare Advantage or OA. National insurers have pulled out of multiple states because they cannot make money with the rates that CMS is providing for them. So it's a much bigger problem than just the law process.

[Kaj Samsom (Commissioner of DFR)]: And it was more acute here because we didn't have that many players. We're a small market. It's easy for an insurer to pull out of Vermont, a national insurer. So and at the same time, Blue Sauce stopped offering that plan. Another major insurer did as well. So and by the way, we had no idea until a consumer knew because that's how out of the loop and noncommunicative CMS was on that. They don't they don't share that with us. So that's an issue. Mhmm. Thank you. Great. Okay. So solvency so I assume we have till ten.

[David Yacovone (Member)]: You can go till Yeah.

[Kaj Samsom (Commissioner of DFR)]: Fifteen. The the question in the in act 68 for us was, like, how do we ensure that the solvency of a domestic health insurer, which is Blue Cross Blue Shield, Vermont. And if you had one takeaway from this testimony, I would say that it is that you cannot meaningfully control health insurance or health care costs for Vermonters by suppressing rates. So the real answer to the statutory question is they have to have adequate rates. There is a lot an insurance company, any insurance company can do to influence behavior, influence billing and charges that they get from pharmacy, etcetera. But at the end of the day, the cost of care in Vermont is extremely high coming from the major hospitals, the pharmaceuticals, you know, some of it is, you know, I'm really the wrong person to testify on dynamics of the cost of care in Vermont. That would be probably more Green Mountain Care Board, AHS, etcetera. But again, I'm not saying an insurer can't influence the cost, But Vermont is a very concentrated market. You have two near monopolies, Blue Cross on the insurance side, UBM on the hospital side. And having a meaningful negotiation between the two to lower costs has proven elusive, has had proven difficult. What changed in 2025 last summer with both the rate and the hospital order is far more direct and decisive action by the care board on the cost of care side.

[Robin Scheu (Chair)]: Which we had to authorize, I believe, some of that. That was some legislation we did, some of the health care related.

[Kaj Samsom (Commissioner of DFR)]: It is my opinion, professional and personal, that the Green Mountain Care Board, at least for hospital, which the other issue in Vermont is that we have a far greater amount of services provided in a hospital setting, but at least for hospital, the Green Mountain Care Board, because we don't have multiple competitors and that you can threaten to leave or not sign a contract with an insurer or a hospital, because we don't have that natural market, cost control in Vermont over Green Mountain Care Board regulated entities is the Green Mountain Care Board. That dynamic can change, and I think we're we're starting to see that change. But at this point, the the the key again, the takeaway, I think, the the key to ensuring the solvency of the Blue Cross Blue Shield Vermont is can't, and this did happen in the past, set a file rate for an insured product at the care board level, command that they do certain things in contracting or take or do some math, this aspirational math of what some statute or new dynamic is gonna do to save money, and you'll be fine with this reduced rate while they weren't, you know, over over a several year period depending on the slice you look at, 50 to $70,000,000 was lost on the exchange product. And I think since the longest, I don't remember if it was '17 or '14, but the the the life of that product has been, I believe, an $80,000,000 loss for Blue Cross Blue Shield.

[Mary Block (Deputy Commissioner of Insurance, DFR)]: And just so we're not picking on Blue Cross Blue Shield. We We are not MVP's domestic regulator. They are losing money as well on the QHP market. They lost money in the Med Advantage market also. They pulled out the year before. The difference is that Blue Cross is Vermont is a very small portion of their larger companies' earnings and claims. So they can absorb some of that based on the business they have in New York. But they have also lost a substantial amount of money, tens of millions of dollars of money in both the QHP market and the Med Advantage market.

[Robin Scheu (Chair)]: Wayne and Lynn, but I just want to let people know, so QHP is Qualified Health Plan. Yes. All like to speak in our acronyms.

[Mary Block (Deputy Commissioner of Insurance, DFR)]: Yes. And so what

[Robin Scheu (Chair)]: is a qualified health plan?

[John Kascenska (Member)]: Just so the viewing audience understands that.

[Mary Block (Deputy Commissioner of Insurance, DFR)]: I mean, the short answer, that's an ACA compliant plan.

[Kaj Samsom (Commissioner of DFR)]: Affordable Care Act.

[Mary Block (Deputy Commissioner of Insurance, DFR)]: Affordable Care Act plan, those are the plans that are offered on the Vermont Health Exchange. The Exchange. So those are the individual small group market plans that are offered on the exchange for small businesses and any individual that doesn't have insurance through their employer, for example.

[Robin Scheu (Chair)]: And that's how many Vermonters or how many people are not individual. 70,000. There's some fluid

[Kaj Samsom (Commissioner of DFR)]: in it. That's the entire pool. So the small businesses under 100 and the individuals.

[Robin Scheu (Chair)]: So with that, if a family of four was on there, does they count as four? Do they count as one when you do your own? So it's the actual people.

[Kaj Samsom (Commissioner of DFR)]: We used to say belly buttons, which I loved. We'd get confused. No. Wait, how many belly buttons are we talking about?

[Robin Scheu (Chair)]: Thank you. Okay. I have Wayne Lipton.

[Wayne Laroche (Member)]: So we talked a little bit about the Green Mountain Care Board and cost of services. But also the reserve, it seems to be doing according to those. Right. It isn't there. It seems to be pretty good back 2021. So do you know anything about the thinking of the Green Mountain category, why they're not

[Kaj Samsom (Commissioner of DFR)]: putting enough into the reserves? Right. So, you know, I think they should speak for themselves in terms of the thinking, but I think it's fair to say affordability. Right? So they have an affordability mandate in statute. So when they see a 13% file rate increase and they see an insurer saying we need this because this is what claims are showing us. And and keep in mind, very generally, more so than in other lines of insurance, the margins are tight, health insurance. So it it's you know, for a health insurer to get 10¢ on the premium dollar for admin and contribution to reserve would be great. You know? Sometimes they're getting worse, and, obviously, with the losses, they got negative 2¢, you know, over the life. But, affordability, I believe, is what drives the care board to kind of sometimes has has trumped the need for an insurer surplus in some of

[Wayne Laroche (Member)]: their systems. So failure to control that affordability or if you turn that around and actually control that, you would take out of the reserve problem at the same time probably because they wouldn't have a reason for not allowing more to go into the reserve. So it'd probably kill two birds with one stone if you fix the hole.

[Kaj Samsom (Commissioner of DFR)]: Yeah. In terms of, like, statutorily?

[Wayne Laroche (Member)]: Or No. Following up with what the Green Mountain Care Board's doing. I don't know if it would require statute change or not. Obviously, there's a problem.

[Kaj Samsom (Commissioner of DFR)]: Yeah. I think some of it's I don't think it is statutorily necessarily. But, again, I think that the issue is that if a rate is unaffordable, that rate actually reflects what the cost of care is, puts the care board in a very difficult position. Now we can look across the country in terms of

[Wayne Laroche (Member)]: what it's costing for various services and procedures, and that will get some idea what reasonable is. Yeah. But then

[Robin Scheu (Chair)]: Well, there's a lot of other factors that you have to consider like population size and health of age.

[Wayne Laroche (Member)]: And that could all be modeled and figured

[Eileen Dickinson (Member)]: But

[John Kascenska (Member)]: somebody has to have the will and capability to fix it.

[Mary Block (Deputy Commissioner of Insurance, DFR)]: And I think that relates partially to the reference based pricing work that the government's care board

[Robin Scheu (Chair)]: We have reference based pricing that's going to be starting. And so that will have an impact too. But that's a year or two out before that. Lynn, you had a question?

[Eileen Dickinson (Member)]: Yeah, just want to go over this. You say that we have 70,000,000 from the QHP. That's the exchange. That's what people buy, that's 70,000 people. Yep. That's the small businesses that are included.

[Mary Block (Deputy Commissioner of Insurance, DFR)]: Yep, small

[Eileen Dickinson (Member)]: businesses. And all individuals and everybody. Okay, everybody that's in that 100 employees. And you say, over the course of this, since 2017 or something, there's been like $80,000,000 loss. Now, the question is that I have, we had a business that had small business insurance that we had to choose between Blue Cross and MVP and one

[John Kascenska (Member)]: or the

[Eileen Dickinson (Member)]: other. But we had a deductible, which was considered to be really high at like $500 Maybe it went up a little bit to $1,000 maybe not. Under the health exchange ACA, the cost of that insurance went up. The deductibles have gone way up. But the same policy, or maybe the first year was lower, how can you be losing money? Or how can you be? If you're losing money and the rates are all going up, part of that is obviously related. But it seemed like every year, people find the health insurance costs to be on the exchange to be difficult.

[Kaj Samsom (Commissioner of DFR)]: Are objectively unaffordable.

[Eileen Dickinson (Member)]: Yeah, and the deductible,

[John Kascenska (Member)]: you may as well just have a major medical.

[Eileen Dickinson (Member)]: You got a $5,000 deductible, you may as well just have a major medical that we had back forty years ago. You really wouldn't kick in until you got a catastrophic event or a hospital event or something. But that's the question I have is that how can we lose so much money on that? Is that because we're not charging enough? The short answer is the cost of health care went up

[Mary Block (Deputy Commissioner of Insurance, DFR)]: faster than the cost of health insurance.

[Kaj Samsom (Commissioner of DFR)]: Right. And, again, broader factors demographically, second oldest state. There's an absolutely straight line between average claims and age. That's just Right. We all experience it as we get older. We all know it.

[Eileen Dickinson (Member)]: Yeah. The other thing is who regulates the reserves? I mean, I was so I'm just saying you do that. You do that with captives.

[Kaj Samsom (Commissioner of DFR)]: We do it with all our regulated assets.

[Eileen Dickinson (Member)]: Yeah. So how did the Blue Cross get so reduced and use up all the reserves under the regulations that you're supposed to be doing?

[Kaj Samsom (Commissioner of DFR)]: Because we don't have rate authority. Because the primary plate the primary need for reserves is on your fully insured products, like not on your self insured products. State of Vermont self insured, Blue Cross just administers it.

[Eileen Dickinson (Member)]: Yes.

[Kaj Samsom (Commissioner of DFR)]: Yes. There's the need for reserve is because they are They're full of on the yeah. And self insured. For the QHP, for large group, Blue Cross is entirely on the risk. Right? If if they estimate a 100 and it goes to $1.20, that $20 is coming from Blue Cross. We regulate the reserves. We recommend their risk based capital, which is an esoteric thing that you can read in all this paper to learn about, should be at $5.90 minimum. And I believe history has shown why that is a good number because they were at about 600 before it might syndicate. Familiar.

[John Kascenska (Member)]: No, no, it's not a million.

[Kaj Samsom (Commissioner of DFR)]: It's a percentage of a regular basis or not.

[John Kascenska (Member)]: It's a measure.

[Kaj Samsom (Commissioner of DFR)]: It's all right. A measure.

[Robin Scheu (Chair)]: It's going to move us along. Nolan, we have posted Nolan's issue brief. It says it should be required reading for all members

[Eileen Dickinson (Member)]: of the body,

[Robin Scheu (Chair)]: not just us. So you can all read that. So we've got Tom and John.

[Eileen Dickinson (Member)]: Okay, John.

[John Kascenska (Member)]: Oh, thanks for your color. Good to see you. We talked on the phone a bunch about

[Robin Scheu (Chair)]: We should. These kinds of things

[John Kascenska (Member)]: a little while ago. So Blue Cross Blue Shield, what is their reserve?

[Kaj Samsom (Commissioner of DFR)]: In in dollars? Roughly. I've

[Mary Block (Deputy Commissioner of Insurance, DFR)]: I don't know.

[Kaj Samsom (Commissioner of DFR)]: I I think in terms of RBC, I believe it's at its you know, if you look at the chart in act 68 at at that top of that chart, I believe it was I'm gonna ask that to be corrected if I'm incorrect. A little over a 100,000,000. Okay? And when they got down to the low point, we're talking $2,030,000,000 range, then they got a a loan from their affiliate, Blue Cross Blue Shield of Michigan Mhmm. Of $30,000,000. That that essentially, within a couple million, without that loan, we would have probably taken over. We're close to taking over the company. Right. So so yeah. In dollars, it's in that range.

[John Kascenska (Member)]: Yeah. So what ought that be and how could potentially get there? Yeah.

[Kaj Samsom (Commissioner of DFR)]: And that's the short. So we've we've years ago, not too long ago, perhaps under Pcheck, mister Pcheck, the department approved analyzed independently with an actuary approved what an appropriate range was, taking into account that they are a nonprofit, single state, quasi governmental entity enabled by our statute. What's an appropriate reserve? Normally, financial folks like me would say as much as they can get, like minimize risk and as much as you can get in a competitive market with your rate. Blue Cross, of course, is different. So with all that sensitivity, the range that we approved and managed to as a regulator is, like, $5.90 RBC, which, you know, it really depends on what way their business is, what that dollar amount is, but something worth of a 100,000,000 up to, like and then we had a cap too. After this, it's maybe a little much considering affordability. You know? They got down from RBC metric to the one to 300% range, so half of that. And it's it's in the

[John Kascenska (Member)]: chart. Yeah, thanks. Yeah,

[Robin Scheu (Chair)]: we want you to take us through this

[John Kascenska (Member)]: before Yeah,

[Robin Scheu (Chair)]: Go ahead. Let you go. And I would just say, did I also hear correctly that they had borrowed money from Michigan because they had sort of an affiliation, but that's been paid back? Correct. Correct. So that's a relief.

[Kaj Samsom (Commissioner of DFR)]: It's very much a relief.

[Robin Scheu (Chair)]: Yes. Because they were paying a lot every month. 8%. Take us through what you need to take

[Eileen Dickinson (Member)]: us through.

[Kaj Samsom (Commissioner of DFR)]: You know, I think we could talk we I could drone on about RBC. In terms of what I wanna take you through, I think I've done it in terms

[John Kascenska (Member)]: of K.

[Kaj Samsom (Commissioner of DFR)]: Thank You know, we need to yeah. So I can take you through that we have a bill. It's $5.85 that offers some things we think will improve the situation both on affordable cost of care and also for our domestic insurer. We haven't even testified on that yet.

[John Kascenska (Member)]: So that's in house health care. Yeah.

[Robin Scheu (Chair)]: Dave has a question, so maybe

[David Yacovone (Member)]: If there's time.

[John Kascenska (Member)]: Yeah, please, go ahead.

[David Yacovone (Member)]: My understanding is the health of the insurance company is predicated in part on the size of the pool. So there's healthy people, younger people, people with need, etcetera. Has the growth of the self insured with the so called ERISA protections, has that damaged or put Blue Cross in a in a difficult situation?

[Kaj Samsom (Commissioner of DFR)]: Well, yes and no. So, absolutely, the opportunity for a group to go self insured, they will only execute on that opportunity if their risk pool, their employees are healthier. So and for Right. So so, yes, it it cannibalizes what they'd call the morbidity of the pool. Every time you lose a group to the pool or an or an individual finds something else, a healthy individual, that that pool gets a little bit cheaper. And the next time they file rates, a it's little bit higher, which takes that next group that's on the edge. Oh, it's cheaper to go self insure it now. That's a dynamic we have to always be concerned of in health care policy. The question of is that what causes does that cause Blue Cross' financial difficulties? It is at the end of the day, if the rate goes up like this for their pool, they have to know it, see it, and file for it, get it approved. So it can be a no. They can be financially healthy and have a very, very sick pool that they are providing insurance to as long as they have the right rate. The issue in Vermont is that right rate, the correct rate, the adequate rate is so high, you know, that I think it's, you know, not to put words in the mouth of the care board that they've had real trouble approving the filed rate for a pool that it just you know, also to to your question Mhmm. The the experience of that pool needs a $100, and a $100 is way off the charts in terms of affordability. And it's like, I'm sorry. We can only give you 98. That's when it becomes a solvency.

[David Yacovone (Member)]: And finally, to your knowledge, have any states created a state health insurance program?

[Kaj Samsom (Commissioner of DFR)]: Well, we are a state based exchange. Maybe can you elaborate on that question?

[John Kascenska (Member)]: Well,

[David Yacovone (Member)]: Vermont health insurance program. It's the state of Vermont as opposed to Blue Cross, MVP, etcetera. And would would that that alleviate the problem or just

[Kaj Samsom (Commissioner of DFR)]: Cutting out an insurer, essentially cutting out the middleman. I would guess that it would be hard for the states to come in and outcompete a Blue Cross or an MVP in administering that. It takes real IT, real work, real phone, you know. I I just don't see that. The

[Mary Block (Deputy Commissioner of Insurance, DFR)]: the other issue is that it doesn't matter whose plan it is, you still have to face the same health care costs. So you still have to pay those high health care costs.

[Robin Scheu (Chair)]: Unless you can contract for some lower amount, but there are limits to that Yes. As well. If

[Kaj Samsom (Commissioner of DFR)]: we had five powerful insurers in terms of market power at five different hospital groups in our population centers, we would have an entirely different dynamic. We just don't have that.

[Eileen Dickinson (Member)]: We just do not have

[Robin Scheu (Chair)]: the scale to do that.

[Kaj Samsom (Commissioner of DFR)]: We don't have the scale. We don't have the comp we don't have competitive forces. So Right. That's why I say between DFR and Green Mountain Care Board in this body, this is how we regulate cost and freight or how we control cost.

[Robin Scheu (Chair)]: Yeah, exactly. Okay, Lynn?

[Eileen Dickinson (Member)]: Yeah, I just want to say I was on the POC way back when there was BISHKER. And you were all part of the same group. BISHOP determined the rates and regulated the hospitals. And now we

[Kaj Samsom (Commissioner of DFR)]: I don't think we ever HCA, you're right. HCA regulated It the

[Eileen Dickinson (Member)]: was all combined.

[Kaj Samsom (Commissioner of DFR)]: Yes, yep. No, I was there.

[Eileen Dickinson (Member)]: They were all in there.

[Kaj Samsom (Commissioner of DFR)]: I was there in those days, yep.

[Eileen Dickinson (Member)]: Banking, insurance, securities, and health care administration. Yes. The issue is that when you talk about the rates and the reserves and the things that you're responsible for, where's the communication between you and the Green Mountain Care Board? And that doesn't have to get to a crisis where things start literally becoming insolvent, where you start

[Kaj Samsom (Commissioner of DFR)]: Right.

[Eileen Dickinson (Member)]: No. Cooperating. Because I understand you still do cooperate.

[Kaj Samsom (Commissioner of DFR)]: Yes, very much.

[Eileen Dickinson (Member)]: So the question is, they're setting the rates, were they really aware of the financial solvency? I mean

[Kaj Samsom (Commissioner of DFR)]: I think there's a written record that one could examine there. I wasn't at the department during this period where we saw a lot of these losses coming in, but it's all filed rates, filed opinions, third party actuaries, very lengthy opinions on the rate that give the justification for it. I'd say very importantly that the communication, not just since I started in April, but even before that with commissioner Gaffney and deputy Brown at the time has been, know, mostly largely prompted by the the financial challenges has been really good. I think there are lessons learned from that, and that needs to continue. More formally, with every rate, we give solvency opinion to the care board. It's not binding, has no power except for raising the issue. Brief DFR solvency opinions on these rates have always said you need to support an adequate rate, and you need and every rate has a contribution to reserve in it, which, you know, just to keep up with medical inflation and claims inflation, the reserve needs to keep up too. And there there has to be a contribution to reserve. And so we've always fully supported, analyzed, and said you have to approve this contribution to reserve, and historically, they have not. What

[Eileen Dickinson (Member)]: would be the impact of caution? How do possible shows?

[Kaj Samsom (Commissioner of DFR)]: Does that come into question anywhere? Well, there is an impact cost shift. One way or another, I think it ends up in what they pay. If there's cost shift of uninsured people at the hospital, hospitals in the building

[Eileen Dickinson (Member)]: Medicaid, Medicare, which underpay for the service and

[Kaj Samsom (Commissioner of DFR)]: insurance And then that make up the difference. Yep. Yes. That's an impact. It is

[Mary Block (Deputy Commissioner of Insurance, DFR)]: a factor.

[Robin Scheu (Chair)]: Okay. So weight?

[John Kascenska (Member)]: So on the graph of the reserve, what's the inflection point about 2021, 2022? Like, what happened? What happened?

[Kaj Samsom (Commissioner of DFR)]: Just a consistent increase in claims.

[Robin Scheu (Chair)]: Utilization is

[Mary Block (Deputy Commissioner of Insurance, DFR)]: Utilization is a big yes.

[Robin Scheu (Chair)]: But that's what we're seeing with Medicaid as well, all over the everything in health care people are using.

[Wayne Laroche (Member)]: One was COVID all together. Pandemic.

[Eileen Dickinson (Member)]: Years

[Robin Scheu (Chair)]: ago. Yeah. Not in 2021. It's officially announced. Oh god. We're out.

[Wayne Laroche (Member)]: I was just trying to look at that graph. I'm trying to make sense. Yeah.

[Kaj Samsom (Commissioner of DFR)]: And so so maybe responsive to that is that as part of that, our intervention demanding a plan from Blue Cross, they did an independent claims review, try to get at what was happening, what was driving it, and then we did an independent review as well. The conclusions from both of those reviews are somewhat unsatisfying and that there's no smoking gun. We know that the claims trend during the period, generally the period you see on this graph, the billings to Blue Cross Blue Shield rose at a faster rate for UVM Health Network than the other major hospitals, And that is the one of the hospital claims, I believe, are 50% of all claims statewide. And Blue Cross Blue Shield sorry. The Health Network is 30 something percent.

[Mary Block (Deputy Commissioner of Insurance, DFR)]: 38%, I wanna say.

[Kaj Samsom (Commissioner of DFR)]: So that was a factor that there was just a

[John Kascenska (Member)]: something was happening in that. More people going to to the hospital from other places, obviously, unless

[Kaj Samsom (Commissioner of DFR)]: Potentially, so many reasons that for the trend, greater geographic thing. It could have been people gravitating to that. Percent there.

[David Yacovone (Member)]: Yep. There's

[Robin Scheu (Chair)]: lots of reasons. There's not

[Kaj Samsom (Commissioner of DFR)]: Lots of reasons. Bad.

[Mary Block (Deputy Commissioner of Insurance, DFR)]: There's not yeah. There's not one this. Not one reason.

[Eileen Dickinson (Member)]: Yep. Yeah.

[Mary Block (Deputy Commissioner of Insurance, DFR)]: If only it was pregnancy.

[Kaj Samsom (Commissioner of DFR)]: Yes.

[Eileen Dickinson (Member)]: Is that pay on books at UDM? Is there people on independent commercial insurance at UDM than other places?

[Kaj Samsom (Commissioner of DFR)]: Not sure. Care Board might have that data.

[Mary Block (Deputy Commissioner of Insurance, DFR)]: Care Board might know.

[Eileen Dickinson (Member)]: They've got a better payer mix than the other hospitals, for instance.

[Robin Scheu (Chair)]: Yeah. So anyway, we're in a better place. Blue Cross is a better place than they were last year, which is really a

[John Kascenska (Member)]: good thing. And so thanks

[Robin Scheu (Chair)]: for your part in that. That's a number of things. But it was dicing last year.

[Kaj Samsom (Commissioner of DFR)]: Yeah. And if I could just add one more piece that actions we took this summer, we issued an order while they were negotiating Blue Cross. MVP was part of that order as well. They sent it to it that no none of these two insurers would contract with a hospital without first coming to the department with a plan to say how they've put savings into that contract. So that applies to twenty twenty six contracts. So that gave us a more formal front seat in the negotiations around cost. We also appointed I'm sure you know that the Green Mountain Care Board appointed Mike Smith as liaison to the hospitals. We appointed a contracting expert, a consultant hired by the department to be in the room and be part of those negotiations. Okay. And so, you know, a lot of that is confidential, necessarily so, but I would say that those, from an affordability and progress perspective, those negotiations went very, very well in my opinion. So I

[Robin Scheu (Chair)]: think ramping up oversight has been a very good thing. Think doesn't Blue Cross have probably hundreds of different contractors so that every time you can negotiate a contract or fine tune those negotiations, a lot of little ones add up to something bigger.

[Kaj Samsom (Commissioner of DFR)]: Yes, yeah, mean that's a possibility.

[Robin Scheu (Chair)]: Pay attention to all those pieces. Yeah, that's true. I'm just going to turn, put Nolan on the spot and see if there's anything else you wanted to add. We'll have you come back and talk about your brief, but is there anything in this conversation you'd like to add to? Okay. That's great. So we will have Nolan come in at some point. This is not budget adjustment related, but we'll have him come in and talk about the issue brief so we can all get a little bit more educated on that. Thank you very much for your time. We it. And we will see you around the building.

[Kaj Samsom (Commissioner of DFR)]: Yes, thank you very much.

[Robin Scheu (Chair)]: Maybe you're coming back for somebody hit us for the budget, FY27 budget.

[Kaj Samsom (Commissioner of DFR)]: So

[Robin Scheu (Chair)]: committee, we, if I can get to the right day, today's still Wednesday, we'll take a break. We've got AHS coming in to talk about the implementation impacts of HR1. That was the bill that was passed last July by the House and the Senate that has had huge impacts on Medicare and Medicaid and other things like that. And so we're going to

[John Kascenska (Member)]: be talking about how will that work.

[Eileen Dickinson (Member)]: Is this a federal HR one?

[Robin Scheu (Chair)]: Yes. I'm not calling it by the name that people want.

[John Kascenska (Member)]: Some people call it guy.

[Robin Scheu (Chair)]: It has the word bill at the end. Oh is this the lots of b's in it. So anyway it's HR1, no this The reconciliation? Well it's not the CR1 which is the continuing resolution and I might remind you that that only goes to January 30, and we'll see what happens there. I did send you the email I got about the e board meeting on Friday and link to how you can watch it and the materials will be coming. We obviously won't get the information about the revenue forecast until that day. So anyway, that's for you.