Vermont has a real opportunity to bring market discipline to healthcare through reference-based pricing (RBP). The idea is simple: insurers set a benchmark for what a procedure should cost – usually tied to Medicare or another fair market rate – and patients are responsible for any costs above that amount, giving them a clear incentive to compare prices and make informed choices. Providers, in turn, know the “going rate” for different procedures and are encouraged to offer care at or below that level. Suddenly, efficiency matters. Transparent pricing matters. Competition matters. States like California, Minnesota, and Tennessee have used RBP for procedures like joint replacements and outpatient care and have seen costs drop by 20 to 40 percent compared with traditional insurance models.
Unfortunately, Vermont’s proposed S.190, though claiming to be a reference-based pricing reform, is actually a top-down, government-controlled price-setting scheme. Instead of letting insurers set a benchmark for providers to negotiate around, the bill directs the Green Mountain Care Board (GMCB) to set maximum prices. They GMCB is even tasked with making sure insurance premiums go down as a result of these price controls, which is risky because it forces hospitals and insurers to meet regulator-set numbers rather than letting competition drive efficiency, leading to problems people notice in everyday life.
Insurers could narrow networks, meaning your preferred doctor is not covered. Out-of-pocket costs like copays and lab fees might go up to make up the difference. Small hospitals or rural clinics could even close because they cannot operate under the margins created by the price caps, leaving patients with fewer choices. Forcing premiums down may make healthcare look cheaper on paper, but it can also make it harder to access, less flexible, and more frustrating for patients.
In addition, S.190 introduces default caps for new or uncategorized procedures which prevents free-market price discovery and negotiation. Even outsourced physician services, such as anesthesia or emergency medicine groups, are folded into hospital rate controls, stripping independent providers of the ability to compete on cost or efficiency.
S. 190 is a fundamental contradiction. It is labeled as a reference-based pricing reform but simultaneously imposes regulatory price-setting and enforced premium reductions – which undercut the market-based mechanisms that actually make RBP effective. Instead of harnessing patient choice and insurer competition to bring prices down, Vermont would be doubling down on centralized control and preserving the inefficiencies true RBP is meant to address.
If Vermont really wants healthcare to be more efficient, sustainable, and transparent, the state should embrace true reference-based pricing through transparent insurer-set benchmarks that lead to price negotiation, not government mandates that further eliminate market signals.
