Gov. Phil Scott vetoes ‘soft opening’ for hospital pricing reforms

Gov. Phil Scott has vetoed Vermont lawmakers’ most notable attempt at healthcare reform this year, arguing that it would have unfairly concentrated savings with a minority of Vermonters.

“This bill would exclude most payers from the affordability gains achieved in FY2027 and, in doing so, add unnecessary complexity, inequity, and cost,” the Republican governor wrote in his letter vetoing S.190 Tuesday evening.

Lawmakers believe a reform called reference-based pricing, which caps what hospitals can charge for individual procedures, will help get the state’s spiraling healthcare costs under control. And last year, they passed Act 68, which directed the Green Mountain Care Board to begin reforms in the 2027 fiscal year.

But what was written into Act 68 was both ambitious and vague. S.190 was intended to flesh out for regulators the details behind this reform framework — and to fast-track changes for parts of the market. House Health Care Committee Chair Rep. Alyssa Black, a Democrat, had called the bill “a soft opening” for reference-based pricing.

Act 68 envisions that reference-based pricing will eventually apply to the entire commercial market. But S.190 would have allowed regulators at the Green Mountain Care Board a dry run at reform. Starting in the upcoming budget cycle, regulators could have applied reference-based pricing to two types of insurance plans: those sold on Vermont Health Connect, the state’s health insurance exchange, and those offered to school employees.

The legislation’s architects reasoned that targeting these two groups for immediate relief made sense. Healthcare significantly contributes to rising school spending — and therefore property taxes — and plans offered on the state exchange lost thousands of participants after enhanced federal subsidies expired this year.

But Scott said he didn’t buy that logic.

“Vermont will not solve its affordability crisis by directing savings to some payers while excluding others,” he wrote Tuesday.

The Green Mountain Care Board had supported the bill, and in particular the provision that carved out Vermont’s Affordable Care Act plans, which are the most expensive in the nation, for early pricing reforms. The state’s entire insurance market may be stressed, according to board chair Owen Foster, but exchange plans are uniquely vulnerable as a “market of last resort.”

With or without S.190, the board can reduce next year’s hospital budgets. But Foster argues regulators can only cut so much next year without risking financial trouble for the state’s fragile hospital system. Concentrating savings in parts of the market, he said, would have granted some Vermonters meaningful relief — instead of giving everyone just nominal help.

“Unfortunately, right now for 2027, there’s simply, like, not enough savings to go around,” Foster said.

Mike Fisher, Vermont’s chief health advocate, had also backed S.190 and agreed that the individuals and small businesses who rely on ACA plans were especially deserving of relief.

“Vermont businesses that have nowhere else to go are paying the highest prices in the country,” he said.

Act 68’s mandate to move the state to reference-based pricing remains on the books. Fisher said that while Scott’s veto was “disappointing,” he hoped it wouldn’t set back the broader reform effort.

“We can’t let the partisanship or the squabbles in the Statehouse interfere with that task,” he said.

The Vermont-NEA, the state’s largest teachers union, has spent years pushing for reference-based pricing. In a statement, the union said that Scott’s veto revealed his “affordability agenda is nothing but hot air.”

“The governor today showed that when it comes to reigning in out-of-control hospital and healthcare costs, he’s all talk and no action,” said NEA president Don Tinney.

Scott pitched the Legislature on a suite of mostly deregulatory healthcare measures during this session, but lawmakers ultimately did not adopt any of his ideas. Tuesday’s veto letter said he planned to advance “several key provisions” from his reform package via executive action, although he did not say which.