Governor Phil Scott’s Healthcare Executive Order 05-26 comes at a critical moment for Vermont. The state now has the highest commercial health insurance premiums in the country, with a benchmark Silver plan on the exchange costing roughly $1,299 per month compared to just $401 in neighboring New Hampshire.
The Executive Order (E.O.) will not solve Vermont’s healthcare affordability crisis overnight, but it represents an important shift in approach. For more than three decades, Vermont has largely responded to rising healthcare costs with additional regulations, mandates, and government oversight that reduced competition, limited consumer choice, and contributed to steadily rising costs.
Rather than adding another layer of regulation, Governor Scott’s order begins removing barriers that have made Vermont’s insurance market one of the least competitive in the country.
Let’s break it down.
1. Modernizing Community Rating
The E.O. directs the Department of Financial Regulation (DFR) to develop rules allowing insurers to make limited premium adjustments based on age and tobacco use.
This change is step towards addressing one of the major structural changes Vermont made in 1992, when it adopted Community Rating and Guaranteed Issue. Together, those policies required insurers to charge nearly identical premiums regardless of age and accept all applicants regardless of health status, which meant younger, healthier Vermonters often paid far more than their expected healthcare costs. Many chose to forgo coverage until they needed care, leaving insurers with older, sicker risk pools and steadily increasing premiums. Without enough healthy policyholders to balance the cost of higher-risk enrollees, insurers could no longer price coverage sustainably, and more than dozen insurance companies eventually left the Vermont market.
Under the Governor’s E.O., insurers could vary premiums by no more than 20 percent above or below Vermont’s community rate (still significantly more restrictive than the federal framework, which allows age-based premium variation of up to 3-to-1 and tobacco-related adjustments of up to 1.5-to-1). Currently, Vermont and New York are the only two states that completely prohibit age-based premium variation in the individual and small group markets, meaning a healthy 25-year-old pays roughly the same amount as someone nearing retirement, despite using only a fraction of the healthcare.
Allowing modest rate adjustments based on age or tobacco-use is not about penalizing older Vermonters or smokers, but about allowing flexibility that better reflects expected healthcare costs and encourages younger, healthier individuals to remain insured. A broader, healthier insurance pool makes Vermont a more attractive market for insurers, encourages additional competition, and helps reduce premiums over time.
2. Pursuing a Federal Reinsurance Waiver
The E.O. also directs Vermont to pursue a federal Section 1332 waiver to establish a state reinsurance program.
Reinsurance functions as insurance for insurance companies by helping cover exceptionally expensive medical claims. Without it, insurers must build those catastrophic risks into every premium they charge. By reducing uncertainty, reinsurance lowers costs for consumers and encourages more insurers to participate in the market.
More than twenty states have successfully implemented reinsurance programs, including New Hampshire. Before launching its program in 2020, New Hampshire ranked 15th nationally for benchmark premium affordability. Today, it has the lowest average benchmark Silver premiums in the country.
NFIB Vermont estimated that a Vermont reinsurance program comparable to New Hampshire’s would cost approximately $42 million total, with roughly two-thirds funded by federal pass-through savings — meaning Vermont’s net state cost could be around $14 million to achieve an estimated 10–13% premium reduction.
Reinsurance is not a permanent solution to Vermont’s underlying healthcare costs, but it has consistently proven to be one of the fastest ways to provide premium relief while broader structural reforms take effect.
3. Expanding Affordable Options for Small Businesses
Small businesses have been among the hardest hit by Vermont’s expensive insurance market. The E.O. directs regulators to review several reforms that would give employers more affordable options.
One component encourages the restoration of Association Health Plans, which allow small employers to join together and purchase coverage with the bargaining power of larger companies. Before Vermont prohibited new Association Health Plans in 2019, approximately 5,000 Vermonters were enrolled in these lower-cost plans.
The order also directs a review of Vermont’s unusually restrictive stop-loss insurance rules. Stop-loss coverage protects employers that choose to self-fund their health plans from unexpectedly large medical claims. While large employers routinely self-insure, Vermont’s current attachment point for employers under 25 employees is $40,000 (twice the NAIC model recommendation of $20,000, and 100% higher than New Hampshire’s threshold), making self-funded plans impractical for many small businesses.
These reforms would restore choices that Vermont has gradually restricted, allowing businesses to select benefit arrangements that better fit their workforce while avoiding many of the costs built into the state’s fully regulated insurance market. Expanding options is critical at a time when so many small employers have been priced out of offering health coverage altogether.
4. Encouraging Individual Coverage HRAs
The E.O. also explores Individual Coverage Health Reimbursement Arrangements (ICHRAs), which allow employers to provide tax-free contributions that employees use to purchase the health plan that best fits their needs.
ICHRAs allow employers to provide financial support for their employees’ healthcare without taking on the full cost of a traditional small-group plan. They also give employees the freedom and flexibility to choose the coverage that best fits their family and financial circumstances, and they can keep that plan if they switch jobs.
National data suggests these arrangements expand access to employer-sponsored insurance rather than replace it. According to the HRA Council, 83% of employers adopting an ICHRA in 2025 had never previously offered health insurance, demonstrating that many businesses are seeking a more affordable and flexible way to provide benefits to their employees.
ICHRAs are not a standalone solution. Their success depends on a competitive individual insurance market where employees have affordable choices, which makes the order’s broader efforts to increase competition and lower premiums even more important.
5) Green Mountain Care Board
Finally, the E.O. directs the Green Mountain Care Board (GMBC) to fully utilize the statutory reference-based pricing authority granted under Act 68.
Reference-based pricing can help reduce healthcare spending by tying insurance payments to objective pricing benchmarks rather than negotiated rates alone. Used appropriately (and preferably by insurance companies rather than state regulators), it can place downward pressure on healthcare prices.
However, lasting affordability requires addressing the structural barriers that allowed costs to rise in the first place. Over the years, Vermont has accumulated regulations that make it difficult for new providers to enter the market. Certificate of Need laws require state approval before providers can open facilities, expand services, purchase major equipment, or add hospital beds, protecting existing providers from competitive pressure at the expense of patients. Independent ambulatory surgery centers, for example, routinely perform many procedures at 40-60% lower costs than hospital outpatient departments, yet Vermont has very few because of the regulatory barriers.
Market-driven transparency helps, but competition remains the strongest long-term force for controlling costs. When insurers compete for customers and providers compete for patients, innovation increases, prices come under pressure, and consumers gain more choices.
Governor Scott’s executive order recognizes that reality. It does not attempt to solve every challenge facing Vermont’s healthcare system, but it begins reversing decades of policies that have limited competition and reduced consumer choice. Restoring a more competitive marketplace will take time, but allowing consumers, employers, insurers, and providers greater flexibility is an important first step toward making healthcare more affordable for Vermonters.
