Vermont is moving toward market-based reforms aimed at lowering some of the highest health insurance premiums in the United States. Governor Phil Scott, a Republican known for his pragmatic approach, issued an executive order in July to initiate significant changes to the state’s healthcare system, which has struggled with soaring costs and limited insurer participation.

The state’s individual insurance market, particularly for plans offered through the Affordable Care Act (ACA), ranks among the most expensive nationally. Vermont’s benchmark silver plan averages $1,299 per month—a figure roughly 60% higher than neighboring New York and triple the cost in New Hampshire. Even the lowest-cost plans carry monthly premiums around $824, often paired with deductibles approaching $10,000.

Several factors contribute to Vermont’s high premiums. Strict regulations have reduced competition; only two insurers currently operate in the market, with Blue Cross controlling nearly 70% of enrollments as of 2024. Additionally, Vermont is one of only two states, along with New York, that prohibit charging higher premiums to older individuals or smokers. This restriction, though aimed at affordability, has discouraged younger, healthier residents from purchasing coverage, pushing the uninsured rate among young adults to nearly three times the statewide average.

In response, Scott’s executive order permits insurers to vary premiums by up to 20% based on age and nicotine use, a shift from the state’s previous ban on such variations. The measure also sets the stage for Vermont to join a federal reinsurance program, which has helped reduce premium costs by 10 to 15 percent in neighboring states like New Hampshire. Other planned reforms include expanding association health plans to allow small businesses to pool resources and access more affordable insurance options.

Scott’s push follows resistance from the Democratic-controlled legislature, which opposed broader reform proposals he presented earlier this year. Lawmakers objected to his suggestion allowing insurers a 5% premium variation based on age—short of the ACA’s permitted 3-to-1 ratio—and instead proposed legislation that would lower individual-market premiums by increasing costs for businesses, a measure the governor vetoed in June.

The governor emphasized the need for structural changes that promote affordability, consumer choice, and broad-based savings across Vermont’s healthcare system. His recent executive order is the first step toward these goals, targeting a reversal of the market’s decline by attracting younger, healthier consumers back into coverage.

While Vermont’s reforms mark a departure from the state’s previous efforts to establish a single-payer system—an initiative abandoned over concerns about its fiscal sustainability—significant challenges remain. Still, the current approach underscores a willingness to embrace market mechanisms to address persistent affordability issues, potentially offering a model for other states grappling with similar healthcare market difficulties.