How is the Cost of Your Health Insurance Premium Decided?

Every month, you and other Blue Cross VT members contribute premiums that collectively support the cost of care. What you pay each month does more than maintain coverage—it helps fund the care and services that you and other members rely on. This includes medical care provided by doctors and hospitals, prescription drugs, as well as the benefits Blue Cross VT provides to you and your family.

As Vermont’s only local, non-profit health plan, we work to ensure the premiums members pay align with the cost of care expected for the year. Our goal in developing premium rates is to adequately cover projected costs but not charge members more than necessary.

Ever wonder how your premium is set? Behind the scenes, we analyze data and estimate costs to get it right. Here’s a look at what goes into the process.

Rate Development

We consider a wide range of factors when preparing a rate estimate for the coming year, including:

• Prior year claims experience. We compare all member claims from last year to what we expect. Considerations include – were the claims higher or lower than expected? Are adjustments needed for the upcoming year?
• Membership make-up. Our analysis estimates how many members we expect to have in the coming year and whether demographic changes could impact claims. For example, how might changes in age and gender among a plan’s members affect the expected number and cost of claims?
• Trends in utilization and costs. We look at how members are using health care services and medications, and what that care costs.
• Impact of state and federal laws and regulations. As the state and federal governments enact new health care laws and regulations, we examine how they will affect our health plans.
• Administrative costs. We work hard to keep our administrative costs, such as staffing, technology, and our facility costs, as low as possible. Less than 6 cents of every premium dollar goes towards our administrative costs.
• Contribution to the member reserve fund. We maintain a member reserve fund so that we’ll be able to pay all claims for our members’ care—no matter what. Each year, a small percentage of premiums goes into the reserve fund to provide assurance that claims will be paid, even when unexpected things happen.
• Taxes and fees. Although we are a non-profit organization, we still pay taxes and fees. For example, a health care claims tax is levied on us by the State of Vermont. We include that and other taxes and fees in our premiums.

“For Blue Cross VT to keep its promise to pay our members’ claims no matter what, we must sustain a strong financial foundation. That is only achieved if the premium covers our members’ health care costs,” says Ruth Greene, vice president, treasurer, and chief financial officer. “Additionally, we are committed to finding sustainable long-term solutions to address the cost of premiums and rising hospital and drug costs, ensuring Vermonters have access to quality, affordable care.” 

State Review Process

Premium estimates for health plans purchased by large groups, small groups, and individuals are filed annually with the Green Mountain Care Board (GMCB), the independent five-member board established by the Vermont Legislature that regulates most health insurance premium rates.

Proposed rates for all health plans are thoroughly reviewed by state regulators. The state’s review process includes the following:

• Each health plan must file their rates in mid-May.
• The GMCB hires consultants to review the rates filed by each health insurer. As part of this process, there may be sessions for answering questions from the GMCB and the Vermont Office of Health Advocate, which represents the public. 
• Next, the state’s experts make recommendations on the rate filing for each health plan.
• During the summer, a public hearing allows comments from Vermonters.
• In August, the GMCB makes their decision on how much premiums will be in the coming year.

To learn more about health care costs in Vermont and what you can do to take action, visit VTaffordablecare.com.