State, insurers up the ante over health rates

By Robert Weisman, Globe Staff

The stand-off between Massachusetts regulators and health insurance companies intensified today as most insurers stopped offering new coverage to small businesses and individuals while state officials demanded that the insurers post updated rates online and resume selling such policies by the end of the week.

People seeking to buy health insurance for the first time, or existing customers looking to change policies, found themselves out of luck, at least temporarily, in the aftermath of last week's decision by the state Division of Insurance to reject 235 of 274 premium increases proposed by insurers for what is known as the small group market. The segment covers about 800,000 residents.

Insurance Commissioner Joseph G. Murphy said he has asked insurers to quote rates for new coverage through the state Health Connector's insurance website by Friday and reminded them that they are required by law to do so. The new quotes would use base rates set last year combined with additional rating factors such as the size and age of the workforce, the location, and type of industry, Murphy said.

"It's imperative that consumers have information available to them as they consider their purchasing options," he said. "If we don't see the rates posted by the end of the week, we have a variety of enforcement tools at our disposal, including the ability to fine carriers."

Insurers, however, said they could not calculate new rates until a state Superior Court judge rules on their request for an injunction that would prevent the state from continuing to block increases for the coverage period that started April 1. The case is expected to go before a judge in Boston as early as Thursday.

"We're in limbo until the issue gets resolved," said Lora Pellegrini, president of the Massachusetts Association of Health Plans, a trade group representing most of the state's insurance companies. "There are no approved rates in the market right now. You're seeing the first sign of the kind of market chaos we were worried about."

The suspension of rate quotes was the latest in a sequence of events that began last Friday, the day after the proposed rates were denied.

Insurers began calling the Commonwealth Health Insurance Connector Authority, an agency created by the state's 2006 health care law to help the uninsured sign up for coverage, to ask whether they could keep posting the rates that were rejected, according to agency spokesman Dick Powers. The proposed new rates had been posted before April 1 on the Connector website, a kind of online insurance store, with the expectation they would take effect on that date.

Murphy eventually asked Connector officials to remove the posted higher rates and request that insurers recalculate them in light of the rejected increases. Some insurance companies also stopped quoting policies through other brokers or intermediaries, while others continued to market products with rates that had been rejected, telling customers they would be refunded the difference if the state's rate rejections are upheld in court. Existing policies remain in place, and are not affected by the move to stop offering new coverage.

Insurers would not say today if they would comply with Murphy's call for them to update their policies by Friday. Much depends on how their legal challenge to the state unfolds, they said.

"We're trying to balance all of this," said Jay McQuaide, vice president at Blue Cross Blue Shield of Massachusetts, the state's largest health insurer. "This is a complex situation we've never seen."

While the Blue Cross Blue Shield rate quotes were removed from the Connector website, www.mahealthconnector.org, insurance brokers are still selling policies based on those quotes, McQuaide said. "We've told customers that the rates were rejected and we're challenging that ruling," he said. "And if a rate adjustment is necessary, we'll credit their accounts in future invoices."

But the state's second largest health insurer, Harvard Pilgrim Health Plan, has suspended its rate quotes through independent brokers and other intermediaries as well as the Connector. We are not quoting rates at this time because we don't want to be providing inaccurate rate information," said Harvard Pilgrim spokeswoman Sharon Torgerson.