But the benchmark wasn’t even discussed at a Feb. 6 market outlook seminar in Waltham hosted by the New England Employee Benefits Council. Speakers included representatives of the state’s nonprofit health plans that do substantial business with small employers and individuals, as well as national health insurance carriers serving mostly larger businesses in Massachusetts.
While the nonprofits tended to predict somewhat smaller price hikes on the horizon, almost all insurers said the medical cost trend — which fell from between 11 and 12 percent in 2010 to between 6 and 8 percent last year — will rise again.
They cited a bad flu season in Massachusetts and more demand for medical services from people who delayed visiting doctors or getting elective procedures during the recession. Premiums would not necessarily rise as fast as the medical cost trend, but the two are closely related.
“We expect there’s going to be a continued rise in [health care] utilization simply because we in Massachusetts are getting older,” said Mim Minichiello, senior partner at the Newton insurance brokerage EBS Capstone. “Then you have the second factor of the pent-up demand, which will increase utilization in the next 12 to 24 months.”
State officials have yet to specify how the 3.6 percent cap will apply to contract negotiations between insurers and health care providers, which will be key to its success.
“It needs further definition from the regulators,” said Matthew Fisher, chairman of the health law group at the Worcester law firm Mirick O’Connell.
Small businesses were anticipating relief from premium increases through a state law passed in 2010 that let them forminsurance-buying cooperatives that could qualify for discounts by offering employees wellness incentives. But rules released in November under the federal overhaul trump the Massachusetts rating factors by which the co-ops had hoped to gain parity with larger self-insured organizations.
The result is that a US law intended to increase fairness in health care will make it more unfair — and expensive — for small employers, said Jon B. Hurst, president of the Retailers Association of Massachusetts, which launched the state’s first insurance co-op last year.
Hurst and Peter Forman, chairman of the Massachusetts Association of Chamber of Commerce Executives, met with federal officials in Washington, D.C., on Feb. 15 in an effort to gain a waiver from the federal law. Officials soon after denied the request.
“This is pure discrimination against employees of small businesses,” said Hurst, who still hopes the federal law can be amended by Congress. “The whole thing is ironic and tragic. There’s no question this is going to lead to higher premiums. A lot of small businesses may be looking at 20 percent [premium] increases next year. That makes the 3.6 percent goal virtually impossible.”
Officials at the US Center for Medicare and Medicaid Services, which said it lacked the authority to grant a waiver for Massachusetts cooperatives, did not respond to a request for comment.
Meanwhile, the faster pace of hospital consolidation is making state government and insurance officials nervous. US Department of Justice officials have been evaluating what effect Partners HealthCare’s plan to purchase South Shore Hospital could have on costs and competition. Beth Israel Deaconess’s agreement to acquire Jordan Hospital, unveiled in January, adds to the concern. If both deals are approved, more care on the South Shore would be provided by hospitals owned by academic medical centers in Boston.
Executives at Partners and Beth Israel Deaconess insist their intention is to lower costs by providing more care at community hospitals rather than at Boston teaching hospitals.
“Every health care provider will have to focus on quality and efficiency,” said Beth Israel Deaconess’s chief executive, Kevin Tabb. “We will see [reimbursement] rates stay stagnant or decline over time.”
Others, however, note that whenever the number of companies in an industry shrinks, the remaining players can command higher prices.
“At some point in the end game, the question is whether all the surviving players have enough leverage that they can apply some pressure” on insurers to win higher health care reimbursements,” said Steven J. Tringale, the president of Tringale Health Strategies, a consulting firm in Boston.
Insurers will be closely watching what the mergers do to costs.
“We’re expecting a lot of pressure on prices from hospitals,” said Andrew Dreyfus, chief executive of Blue Cross Blue Shield of Massachusetts. “If the combined entities use their market power to raise prices, it could subvert our affordability efforts.”
Robert Weisman can be reached at firstname.lastname@example.org.