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April 2010 St@teside

Massachusetts Division of Insurance Seeks to Slow Premium Growth

The Massachusetts Division of Insurance has been taking a more active role in trying to prevent the double-digit premium hikes that have been seen around the country in 2010. On Feb. 10, 2010, Commissioner Joseph Murphy issued emergency regulations that required carriers to submit proposed rate changes 30 days prior to their effective date along with additional information that would allow the Division of Insurance to evaluate the reasonableness of proposed rate changes. On April 1, Commissioner Murphy announced that 235 of the 274 rate filings would be rejected, meaning they could not go into effect as scheduled.

The Division of Insurance used a general standard that premium hikes should not be in excess of 150 percent of medical inflation. The 2009 Medical Consumer Price Index for New England was 5.1 percent, so premium increases of more than 7.7 percent were considered excessive. Other reasons for denying the rate hikes include: failure to show adequate justification for variation in payments to providers based on the quality of care they provide and the mix of patients they serve; and, failure to renegotiate those provider reimbursement rates. Rejected premium increases ranged from 8 to 32 percent.

The insurance plans are appealing the rulings with the Division of Insurance and are also challenging the rejection of proposed premium increases in court. Their initial effort to get an injunction that would allow the premium increases to go into effect while they waited on the outcome of appeals and the court challenge was rejected by the court on April 12. The final outcome of their suit has yet to be determined. The insurance plans claim that they incurred losses in 2009 that justify the proposed increases and that many of their provider contracts cannot be renegotiated.

The current debate connects to a series of Boston Globe articles in late 2008 that highlighted the fact that several high-profile hospitals (particularly the two Partners Hospitals—Brigham and Women’s Hospital and Massachusetts General—and Children’s Hospital) were being paid 15-60 percent more than their competitors. These findings were confirmed by a Jan. 29, 2010, report by the attorney general which also found that price variations are not correlated to quality of care, the complexity of the patient population, the level of Medicare and or Medicaid patients, or status as a teaching facility. The Boston Globe estimates that Partners facilities and physicians receive $800 million more per year than if they were paid similar rates to other community hospitals. Partners has recently launched a five-year, $4 billion expansion program.

The Division of Insurance has sought to use its regulatory power to force the insurance plans to pressure these higher-paid facilities to accept lower reimbursement rates. A recent statement by the Massachusetts Association of Health Plans laid the blame at the door of those institutions, saying “Making health care affordable needs to start with addressing the market clout of certain hospitals and physician groups that was identified in the attorney general’s recent report on health care costs and health care cost trends; otherwise, the cost of health care will continue to rise.”