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What the deal between Blue Cross of Vermont and Michigan means for local policyholders

Doctor or psychiatrist consulting and diagnostic examining stressful woman patient on obstetric - gynecological female illness, or mental health in medical clinic or hospital healthcare service center
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About 225,000 Vermonters use Blue Cross Blue Shield of Vermont health insurance.

Vermont’s largest private health insurer, Blue Cross Blue Shield of Vermont, is now a subsidiary of a much larger counterpart in Michigan. State regulators approved the new relationship last week. Blue Cross Blue Shield of Michigan insures about 5.2 million people in Michigan and other states, while BCBS Vermont insures around 225,000 people.
What does the news mean for Vermonters?

VTDigger health reporter Kristen Fountain joined Vermont Edition Tuesday to talk through her reporting on the subject. The following transcript has been edited for length and clarity.

Mikaela Lefrak: Blue Cross Blue Shield of Vermont is merging with another Blue Cross Blue Shield. What does that mean? Why does it matter?

Kristen Fountain: First off, they don't like to use the term merging. They like to use the term affiliation, mainly because the details of the relationship are pretty different than what you think of when you think of a merger. ... Michigan Blue Cross is now the parent organization in a sense, but there's a lot of protections within the contract that the two organizations signed. And in the approval that the Department of Financial Regulation just gave [on Oct. 9], that really lay down some reasons why this is different than a merger.

Lefrak: This is the first affiliation of its kind between Blue Cross [organizations] in the country, is that right?

Fountain: Yeah. I mean, I think it's definitely happened where smaller Blue Cross organizations have been sort of subsumed by others. This is sort of an attempt to provide the smaller organization with the resources of the larger one without removing its local context and local connections. That's the idea. We'll see.

Lefrak: Let's talk through some of the reasoning behind this new affiliation. Why would Blue Cross a Vermont want to become a subsidiary of Michigan?

Fountain: Yeah, it was really interesting. During a public presentation at the end of August, Blue Cross Blue Shield of Vermont CEO Don George really laid this out, and said that he and the Board of Directors really have been struggling for years trying to resolve some of the challenges on the horizon for the company. And a really large part of those challenges revolve around information technology, and data management. The back end of insurance is become extremely important and central to providing services to customers and members, as well as to health care providers of all types. And it's also extremely expensive to invest in and to maintain and improve all the time. So I think that was maybe the primary reason for the affiliation.

Lefrak: We've talked about a number of potential positives that could come out of this new relationship. Are there any concerns or downsides?

Fountain: There have been a lot of concerns by advocates and individual policyholders that they would lose that local connection to what is Vermont's only homegrown health insurance provider. There's a concern that if you call in and you're having trouble with getting coverage, you'll be sent somewhere to talk to someone who has no idea about the context. ... And what [Blue Cross Blue Shield of Vermont says] in response is that really nothing about how they operate will be changing.
 
Lefrak: Blue Cross of Vermont is currently based in Berlin. Do you know if it'll stay that way? And could there be layoffs?

Fountain: The plan is that nothing that's in Berlin would leave Berlin. ... And the Department of Financial Regulation put into its decision-making that any layoffs would have to be reported to the Department, and the Department would have to review any changes on a quarterly basis.

Lefrak: Let's talk bottom line here. For the 225,000 or so Vermonters who currently use Blue Cross of Vermont, could they see drops in their insurance rates, or at least a slowing down of the yearly increase in rates?

Fountain: That is definitely the hope of of many of the different organizations that supported this arrangement — that it would lead to a slowing down of the double digit annual increases that we're seeing. I think that's a tall order for even a larger company or a larger organization. I think the cost increases are largely coming from outside the insurer in a way. ... It's really a whole healthcare system problem.

Broadcast at noon Tuesday, Oct. 17, 2023; rebroadcast at 7 p.m.

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Mikaela Lefrak is the host and senior producer of Vermont Edition. Her stories have aired nationally on Morning Edition, All Things Considered, Weekend Edition, Marketplace, The World and Here & Now. A seasoned local reporter, Mikaela has won two regional Edward R. Murrow awards and a Public Media Journalists Association award for her work.
Tedra worked on Vermont Edition as a producer and editor from 2022 to 2024.