Tuesday, June 26, 2007

Insurance initiative could face budget crunch

By Alice Dembner, Globe Staff

Some of the companies running new subsidized health insurance plans are asking for more money than the state is willing to pay, a Massachusetts official said today, and could precipitate a budget crunch for the state's health insurance initiative.

Under state contracts, four companies now serve about 80,000 low-income residents in the Commonwealth Care program and are working to enroll at least 60,000 more. The state wants to extend their contracts by six months, until June 30, 2008, but the companies are bargaining for a larger fee, according to Jon Kingsdale, executive director of the Commonwealth Health Insurance Connector, which oversees the program.

State negotiators have offered a 4 percent increase, and agreed to pick up more of the cost if expenses rise significantly, Kingsdale told members of the connector board. That would add about $16 million to the state's cost, money that is already built into the fiscal 2008 budget now being finalized by the Legislature. However, that could leave little room for other possible increases in expenses, if enrollment is higher than expected, for example.

From the companies' point of view, "it’s not enough,” Kingsdale said, “and from a budgeting perspective, it’s probably too much.”

The companies are used to working in a climate where doctors and hospitals demand increases of 5 to 10 percent every year, Kingsdale said. But the state needs to keep cost increases to single digits, he said.

"The sustainability of health reform hangs on that," he told the board at a morning meeting.

Kingsdale said he thinks one or two of the companies would agree to the 4 percent increase. If the others don't, the connector would seek new bids from the companies. In that case, enrollment could be suspended until a new contract is signed, Kingsdale said.

Board members suggested that Kingsdale hold the line in negotiations. "Otherwise you’re trapped in a spiral upwards," said Dolores Mitchell, a board member and executive director of the Group Insurance Commission, which manages state employees' coverage.

Officials for the four companies -- Network Health, Boston Medical Center HealthNet Plan, Fallon Community Health Plan and Neighborhood Health Plan -- either declined comment or did not respond to a request for comment.

Posted by Karen Weintraub at 06:15 PM

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