Report From the States

Vermont's Health Insurance Mess

John McClaughry

Skyrocketing health insurance rates for Vermonters is the result of a decade of unwise political interventions in the insurance market, according to a new report issued by the Ethan Allen Institute.

The report, "Reviving Health Insurance in Vermont," traces the history of Vermont's collapsing insurance market since 1984. According to that report, today's moribund market is the direct result of a 1991 state bailout of then-failing Blue Cross, the 1994 plan to create a single-payer scheme and Gov. Howard Dean's fallback strategy of adding costly coverage mandates and constantly expanding (but not paying for) government health care programs.

Medicaid now covers 20 percent of all Vermonters under 65, about twice the national average. Children from families of over $50,000 income now have their medical bills paid by taxpayers --- in other words, socialized medicine step-by-step, through the back door. Families which formerly had private insurance drop it, so they can get "free," government-provided coverage.

The report compares individual insurance rates for the same family in Anderson IN, Norman OK, and Burlington VT. While the difference in policy terms makes a strict comparison impossible, it is clear that the Vermont family of four is paying dramatically more for coverage than families in the other states.

The report offers 15 specific recommendations for reviving the competitive market. Chief among them are the encouragement of tax favored Medical Savings Accounts (MSAs), a repeal of "community rating," legalization of healthy lifestyle discounts, full payment to doctors and hospitals for Medicaid patients, a high-risk pool for the medically uninsurable, and support for Vermont's nine community-based free clinics.

Mr. McClaughry is president of the Ethan Allen Institute, Vermont's free market, public policy research and education organization. E-mail address:

Originally published in the Medical Sentinel 2000;5(4);144. Copyright©2000 Association of American Physicians and Surgeons (AAPS)