After rejecting double-digit increases earlier this year, Massachusetts regulators are allowing a more modest round of rate hikes to take effect in January for health insurance policies covering small businesses and individuals.
Tweet Yahoo! Buzz ShareThis State officials hailed the smaller increases as a victory in Governor Deval Patrick’s campaign to rein in escalating health care costs.
Major insurers said they expect to lose money on the new policies but reluctantly limited the increases to avoid clashing with the Patrick administration as it pushes hospitals and doctors to hold down costs.
“We chose to file inadequate rates, meaning rates we anticipate will not cover the cost of health care our members receive,’’ said Tara Murray, spokeswoman for Blue Cross Blue Shield of Massachusetts, the state’s largest health insurer. “We understand that the rise of health care costs is unsustainable, and we want to work with government leaders and the industry on a solution.’’
Average base rate increases ranged from 2.9 percent to 9.9 percent for the most recent filing period, the lowest in recent memory, state officials said. But some customers will pay more than that after insurers factor in things like the age of a company’s workforce and the type of industry, as they are allowed to do.
Still, the latest premiums are in sharp contrast to what had been requested, sparking a battle between insurers and state officials in the spring and summer. After the Division of Insurance denied the increases and capped rates at 2009 levels, insurers sued the state but lost a bid for a court injunction to prevent the caps from taking effect.
The companies eventually prevailed through the administrative appeal process. Ultimately, however, most reached settlements with regulators, agreeing to keep base rate increases to single digits for one year.
The financial outlook for insurers brightened in the three months ended Sept. 30, when most saw claims fall because of a drop-off in the use of medical services. That, along with a rise in investment income from stronger financial markets, boosted earnings and made it easier for them to limit the upcoming premium increases.
Regulators said it appears that insurers finally understand small businesses and working families can’t afford hefty rate hikes at a time when the Massachusetts economy remains fragile.
“We’ve changed the dynamic in the industry,’’ said Barbara Anthony, state undersecretary for consumer affairs and business regulation. “The pattern of double-digit increases, year after year, has been broken. We’re happy that the carriers are feeling heat and they came in with base rate increases under 10 percent.’’
Anthony conceded the state government still has a long way to go in controlling health care costs, which determine insurance prices. She said the conversation begun by the governor will have to be expanded in the coming year to include hospitals and doctors, employers, and others — in addition to insurers.
But a high-ranking official in the health insurance industry doubted the tempered premium increases would continue unless state leaders tackle the underlying issue of rising medical expenses.
“While this may be welcome relief for employers, it’s not sustainable in the long term unless the governor addresses the market power of some providers,’’ said Lora Pellegrini, president of the Massachusetts Association of Health Plans, which represents insurers.
Pellegrini cited last winter’s report from Attorney General Martha Coakley that identified the clout of the best-paid health care systems as the main factor driving the increases in health costs in Massachusetts.
Patti Embry-Tautenhan, spokeswoman for Tufts Health Plan, said the rates it filed for Jan. 1 had previously been spelled out in its settlement with the Division of Insurance. She said Tufts will submit another round of premiums in February for the period starting April 1.
As part of the settlements with insurers, regulators agreed not to reject rate requests of 9.9 percent or less, setting a threshold for the new filings.
Insurers hope to offset losses in the so-called merged market of small businesses and individuals with profits from other areas. They also want to offer cheaper products to customers and to reduce their costs by taking a harder line in negotiations with doctors and hospitals.
“We’re continuing to apply our best efforts to negotiate more reasonable rates with providers,’’ said Sharon Torgerson, a spokeswoman for Harvard Pilgrim Health Care in Wellesley.
While state officials are readying a payment-overhaul bill to be submitted to the Legislature early next year, the insurance division is drafting regulations that would further pressure insurers to limit premium increases. They will include requirements that insurers restrict their surpluses and administrative expenses, offer limited-network products priced at least 12 percent less than comparable insurance that offers access to more doctors and hospitals, and allow small businesses to band together to buy insurance.
In all, health insurers submitted 329 filings for premiums that would take effect for small firms and individuals at the start of next year.
Increases for Boston-based Blue Cross Blue Shield ranged from 0.9 percent to 18 percent and averaged 4.6 percent, according to regulators. Harvard Pilgrim Health Care submitted increases ranging from 8.2 percent to 11.1 percent and averaging 9.8 percent.
Tufts Health Plan, based in Watertown, filed increases of 9.9 percent across the board for all of its products. And increases at Worcester-based Fallon Community Health Plan ranged from 5.8 percent to 12.3 percent, with an average of 8.3 percent.
“Everyone understands the landscape has changed,’’ said the state’s insurance commissioner, Joseph G. Murphy. “I’ve certainly seen that in my conversations with carriers and providers in recent months. People recognize the days of double-digit rate increases are over.’’
