Rethinking Affordability: When Insurance Fails the Affordability Test

Millions of Americans possess insurance cards yet hesitate to use them. Escalating premiums, deductibles, and out-of-pocket expenses now impact not only low-income families but nearly everyone except the wealthiest. Annual out-of-pocket costs for a family of four now exceed $20,000—enough to buy a new car each year. These substantial expenses compel families to skip preventive services and essential medical care.¹ The notion that “some coverage is better than none” falters when cost-sharing deters care and heightens financial risk.

High patient costs also challenge insurers and small health care providers, intensifying Vermont’s affordability crisis. Our largest insurer, Blue Cross Blue Shield of Vermont (BCBSVT), has requested a roughly 20% premium increase for 2025 individual market plans—a continuation of recent trends involving double-digit increases. Between 2021 and 2024, BCBSVT incurred nearly $152 million in losses, depleting reserves from $133.5 million to $58 million. This is perilously low for a plan that pays an average of $35 million in weekly claims.

Simultaneously, Vermont’s hospitals face severe financial distress. A 2024 report indicated that 13 of the state’s 14 hospitals operate at a loss, with projections suggesting they may need $3 billion in subsidies over the next five years.

As a state health care regulator, I observe this crisis from both ends: patients delaying care despite having coverage, and institutions nearing insolvency even as premiums rise. We must reconsider what we mean by “affordability.” Insurance that appears viable on paper but fails in practice isn’t just inadequate—it’s dangerous.

The Regulatory Disconnect

Under the Affordable Care Act (ACA), a health plan is deemed “affordable” if the employee’s premium contribution for self-only coverage doesn’t exceed a fixed percentage of income, currently 8.39%. However, this overlooks deductibles and co-pays that shift real costs to patients. According to the Commonwealth Fund, 44% of working-age adults are underinsured—meaning their insurance still exposes them to significant financial risk, often with deductibles exceeding $8,000.² These plans technically comply with federal standards but fail to offer meaningful protection.

Survey data reveal the impact: A March 2024 KFF poll found that 41% of insured adults skipped or delayed care due to cost, and over a quarter reported difficulty paying medical bills—despite being insured.³

A Hidden Tax on Access

Affordability isn’t solely about what families pay—it’s about what they receive. Increasingly, the answer is: less. Prior authorization policies, for instance, often function as a hidden tax on care. They demand time and administrative effort, delaying or deterring services that should be routine. In 2023, the American Medical Association found that 94% of physicians reported care delays due to prior authorization, and 33% said it led to serious patient harm.⁴ These bureaucratic barriers transform insurance into a gatekeeping mechanism—not a bridge to care

Policy efforts are underway to reform prior authorization processes. For example, the Centers for Medicare & Medicaid Services (CMS) has proposed rules to streamline prior authorization and improve transparency, aiming to reduce delays and administrative burdens.

When Providers Can’t Afford Coverage

Independent clinicians face a bitter irony, especially in rural or small practices. They’re expected to deliver care in a fragmented system while struggling to provide insurance to their own employees.

As Vermont physician Dr. Pete Wilhelm has observed, independent practices that help lower overall system costs are being squeezed out—not because they provide lower-quality care, but because rising insurance premiums make it nearly impossible to offer competitive benefits or remain financially viable.⁵ These are the very providers keeping care local, accessible, and less expensive—but they face growing pressure to consolidate or close.

A Smarter Standard for Affordability

We need better metrics. Today’s regulatory definitions rely on narrow actuarial thresholds that don’t reflect families’ real financial exposure. A smarter approach would focus on outcomes: whether people can use their insurance to access timely care without risking financial distress.

Two simple benchmarks would help:

• Composite Cost Thresholds: Total annual spending—including premiums and out-of-pocket expenses—should not exceed 10% of household income.
• Delayed or Skipped Care Rates: Claims and survey data should track how often patients forgo care due to cost, regardless of insurance status.

These measures center the patient experience—not actuarial compliance. They also align with reforms already underway in states like Rhode Island, where affordability standards are embedded in the rate review process. Since 2010, the state has capped hospital price growth and required insurers to reinvest in primary care and population health, helping to contain costs without sacrificing quality.⁶

Other possible measures include:

• Indexing premium caps to regional cost-of-living differences.
• Creating income-based cost-sharing subsidies for people who earn too much for ACA assistance but too little to absorb rising deductibles.
• Requiring insurer rate filings to demonstrate progress on delivery system goals, such as improving behavioral health access or investing in rural models.

These options illustrate that affordability and solvency are not incompatible goals. When properly aligned, they can reinforce one another.

Affordability and Solvency Must Coexist

Affordability and solvency have too often been treated as trade-offs. For years, regulators were told to choose: protect patients from rising costs or safeguard the financial health of insurers and providers. Prioritizing the latter has led to a system that is both unaffordable and unsustainable.

In Vermont, years of double-digit price and premium increases were justified in the name of solvency. Yet, the result has been declining enrollment, mounting debt, and widespread underuse of care—outcomes that weaken insurers and providers alike.

The current approach—prioritizing actuarial balance over patient affordability—has produced a paradox: a system that is functionally inaccessible yet still on the brink of collapse. If premiums continue to rise faster than wages and basic care becomes a luxury, both patients and providers will exit the system in different ways.

True solvency depends on a system that people can afford. Affordability is not a luxury—it is a prerequisite for financial stability. And it is not a constraint to be managed—it is the foundation of a sustainable health care market.

Redefining affordability around real costs and actual access will require updated tools, multi-sector collaboration, and above all, centering patients. It may also help to restore something our system has lost: public trust.

As my state shows, failure to solve the affordability crisis will only deepen the solvency crisis.

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