The reason why you have to get a new contract is because they take a loss on the phones they give you when its discounted to two year pricing. Else Verizon would lose big bucks by selling a $200-500 at a deep discount and then someone decide to cancel service. They wouldn't recoup thier money. THink about it if it was your business. IF youa re going to gave somene 200 dollars don't you want a contract to make sure they dont screw you?
I agree to this point as well, one thing you can do is buy ones with 1 year pricing. It is about 70$ more than the 2 year pricing and would give you the ability to upgrade every year.