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2 insurers again seek double-digit increases

Earlier rejections still under appeal

By Robert Weisman
Globe Staff / June 3, 2010

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The state’s two largest health insurers again are seeking double-digit increases in the rates charged to small businesses and individuals, setting up another test of wills with regulators in the Patrick administration.

Two months ago, the state Division of Insurance rejected 235 proposed premium increases that would have taken effect April 1, requiring insurance companies to continue billing customers at 2009 rates. The new round of proposed increases, submitted this week, covers health plans coming up for renewal in the three-month period that starts July 1.

Blue Cross Blue Shield of Massachusetts, the state’s biggest health insurer, is requesting increases averaging 12 percent, on the lower end of the range it submitted earlier in the spring. Harvard Pilgrim Health Care, the number two carrier, wants increases that range from 8.8 percent to 11.9 percent, about the same range it sought in the round that was rejected.

The new premium rates are “actuarially sound and will cover the costs of the health benefits our members will receive,’’ said Tara Murray, a spokeswoman for Blue Cross Blue Shield.

But the rate filings are certain to be contentious at a time when state officials are working to rein in health care costs and insurers say they are being forced to sell policies at a loss.

Insurance Commissioner Joseph G. Murphy and his staff will give the latest round of proposed increases the same kind of tough scrutiny as those they rejected on April 1, weighing “whether they are excessive in relation to the health care benefits provided,’’ Barbara Anthony, undersecretary of the state Office of Consumer Affairs and Business Regulation, said yesterday.

“If the commissioner finds rates that are unreasonable or excessive, then those rates will continue to be disapproved,’’ Anthony said. “We are determined to apply the law to give relief to small businesses and working families who pay these double-digit rate increases.’’

In filing the rate requests this week, insurers met a deadline set during the winter under emergency regulations established by Governor Deval Patrick, and designed to assure sufficient time for state review. In the past, insurers would notify the state of rate increases on the day they took effect.

Lora Pellegrini, president of the Massachusetts Association of Health Plans, said the state rate cap is weakening insurers and distracting from the need to bring down underlying costs charged by hospitals and doctors with the most market clout.

“The health plans are losing money,’’ Pellegrini said. “These rates reflect their claims experience and what they’re obligated to pay under the contracts they have with providers. If they can’t collect the premiums they need, their losses are going to continue to mount.’’

Insurers are challenging the rate denials through administrative hearings within the Insurance Division and in a lawsuit filed in Suffolk Superior Court. A judge denied the insurers’ request for a preliminary injunction that would have let them go forward with proposed increases for tens of thousands of customers, ruling that administrative appeals should be exhausted before the case comes to trial.

Last month, the four major Massachusetts health insurers posted operating losses totaling more than $150 million. They blamed the deficit on the rate cap, which they said was causing market chaos.

In a statement, Patrick called on insurers and health care providers to work together to solve the problem of rising costs. “We have made progress on providing short term relief from double-digit premium increases and will continue to closely monitor rates to ensure they are fair,’’ he said. “To finish the job, however, we need all stakeholders pulling in the same direction.’’

Not every insurer filed new proposed rate increases. Tufts Health Plan, the state’s third-largest health carrier, included its July-to-September renewals in the proposal it submitted before April 1. Another insurer, Fallon Community Health Plan of Worcester, submitted proposed rates for July 1, but declined to disclose the range of increases it is seeking. In April, Fallon asked for increases of 18 to 32 percent.

Insurance Division officials yesterday confirmed they had received a new round of premium proposals from all the major health insurers, with the exception of Tufts. But they said the policy is not to make the proposed increases public until they have been approved or rejected.

Health insurers, for their part, said that until the state rules on the latest proposed rates, they will keep quoting last year’s rates to businesses and individuals. “Because we anticipate the increases will be disapproved, we’re quoting July 2009 rates,’’ said Harvard Pilgrim spokeswoman Sharon Torgerson.

Small businesses and health care providers, who are watching the standoff between the insurers and state officials from the sidelines, say they are concerned about how the fallout will affect their operating costs and their ability to hire and retain employees.

Jon B. Hurst, president of the Retailers Association of Massachusetts, which represents 1,300 small businesses, said the newest proposed increases should be denied. “The message has to be sent that double-digit increases on the backs of Main Street will not be tolerated,’’ he said. At the same time, Hurst said, he hoped the dispute could lend urgency to efforts to control escalating health costs.

About a third of the contracts between insurers and hospitals are being renegotiated this year. Lynn Nicholas, president of the Massachusetts Hospital Association, said she worries that insurers, squeezed by the state rate cap, will try to roll back payments not only to financially strong hospitals but to those that are weaker.

“The challenge is that most hospital margins are so thin that there is just not enough room to give up significantly on their rates,’’ Nicholas said. “Lower rates could force hospitals to make staff reductions because two-thirds of their expenses is staff.’’

Robert Weisman can be reached at weisman@globe.com.