Mass. Health Insurance Base Rate Up 1.2% on Average for Third Quarter

May 1, 2012

The Massachusetts Division of Insurance (DOI) said this week that it is placing on file small-group health insurance base rates for the 2012 third quarter, with an average increase of just 1.2 percent.

Fueled by base rate decreases filed by Tufts and Fallon, this is the second quarter in a row with a less than 2 percent average increase in base rates, according to Massachusetts regulators.

Regulators said the average increase of base rates has fallen dramatically in the past three years. In the third quarter of 2010, after the division of insurance reached settlements between carriers, rate increases averaged between 8 and 9 percent. Since then, a combination of government action, public leadership and market innovation has made Massachusetts a national leader in controlling health care costs, according to DOI.

In April 2010, Gov. Deval Patrick directed DOI to use existing authority to review small-group health insurance rates and use statutory powers to disapprove rates that were unreasonable or excessive. The division disapproved 235 of 274 rates at that point, and later negotiated lower rate increases with carriers.

In the summer of 2010, the legislature passed and Gov. Patrick signed a bill that gave the health care industry new tools to try to deal with rising health care costs. Those measures included expanded review authority for DOI, the creation of group purchasing cooperatives and the creation of limited or tiered network plans that cost subscribers at least 12 percent less than regular plans.

Regulators said that these measures — together with market innovations in integrated care, new cost-sharing models enable by the federal Affordable Care Act and renegotiated contracts between some insurers and providers — have helped Massachusetts make significant progress in controlling health care costs.

Gov. Patrick has also proposed legislation that would give the industry more tools to continue moving toward the kind of integrated care that improves health care quality and lowers total cost by rewarding the quality of care, not the quantity.

“The average Massachusetts consumer should be heartened by this on-going trend,” said Barbara Anthony, undersecretary of the Office of Consumer Affairs and Business Regulation.

“While more work still needs to be done, these small increases prove that we are on the right path. Informed consumers are making intelligent choices that balance their medical needs with financial considerations. We need to continue to push in this area and find more cost savings for families.”

The new rates go into effect July 1 for customers who are renewing or purchasing new coverage in the third quarter of the year.

“These base rate changes of just over 1 percent are the result of cooperation and shared commitment among carriers, providers and the administration,” said Joseph Murphy, commissioner of insurance.

“The continued attainment of modest rate increases is good news for individuals, families and businesses across the Commonwealth. Working collaboratively, all parties in the marketplace have learned a great deal about containing costs without sacrificing quality care.”

A detailed report released last week by the Blue Cross Blue Shield of Massachusetts Foundation calculated that the benefits from sustained lowered health care costs would be in the billions of dollars.

The analysis by Jonathan Gruber, a professor of economics at the Massachusetts Institute of Technology and the director of the Health Care Program at the National Bureau of Economic Research, estimates that Massachusetts businesses and employees would save between $8 billion and $34.5 billion over nine years.

The report, titled “Benefits of Slower Health Care Cost Growth for Massachusetts Employees and Employers,” warned that inaction would have dire consequences for economic growth and municipal budgets. Unchecked health insurance rates would likely result in layoffs as companies attempt to recoup funds allocated to premiums, the report warned.

“Rapidly escalating health insurance costs are a genuine threat to Massachusetts businesses and workers,” Gruber wrote in the report.

“Without strong action, health insurance coverage will erode, workers’ wages will stagnate, and employers will have fewer resources to invest in growing and strengthening the Massachusetts workforce and economy for the opportunities and challenges of the 21st century.”

Source: Massachusetts Office of Consumer Affairs & Business Regulation

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