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State retains 137 rate caps on insurers

By Robert Weisman
Globe Staff / July 2, 2010

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State regulators wrestling with soaring health care costs yesterday held fast to a cap on prices for 137 health insurance plans up for renewal this summer, freezing rates at 2009 levels, while sending three insurers scrambling to supply additional data to justify their proposed double-digit rate hikes.

At the same time, four other insurance companies won single-digit rate increases for 63 plans sold in the so-called small-group market, which covers individuals and small businesses. The state Division of Insurance said those insurers showed more restraint in their rate hike requests than the other companies.

The highly anticipated decision on proposed premium increases for the three-month period ending in September — released early last night after daylong deliberations by state officials — contrasts with regulators’ earlier denial of 235 of 272 rate hikes proposed for the April-to-June period. Those rates were frozen at last year’s prices, and insurers have spent the past three months challenging the rejection.

It is unclear whether yesterday’s decision by the insurance division will have a long-term affect on Governor Deval Patrick’s campaign to rein in health care expenses.

State officials have said rate caps are needed to ease the burden of rising health costs on small businesses and working families in a fragile economy. But insurers have complained the state is forcing them to sell policies at a loss, undermining their financial stability. Last week, they were buoyed by a Division of Insurance appeals panel that overturned rate caps imposed on Harvard Pilgrim Health Care.

While none of the new rate proposals were rejected outright this time, Patrick administration officials said their request for additional information — including the amount of reimbursements the companies pay to different health care providers — left the burden squarely on the insurers to make the case for increases. The insurance division will have 30 days to rule on the rate hike requests once they receive the new data.

“We’re not blinking,’’ said Barbara Anthony, state undersecretary for consumer affairs and business regulation. “We’re doing our due diligence so we can stay the course. If the carriers can’t provide information to justify these rates, they’ll be disapproved.’’

Lora Pellegrini, president of the Massachusetts Association of Health Plans, a trade group for health insurers, said yesterday’s ruling represented ongoing meddling in the insurance industry by Patrick. The governor has pledged to turn down premium increases he considers excessive. “This action by the Patrick administration to not approve rates will continue to cause chaos in the market,’’ Pellegrini said.

Insurance Commissioner Joseph G. Murphy yesterday asked Harvard Pilgrim of Wellesley, Blue Cross Blue Shield HMO Blue of Boston, and Fallon Community Health Plan of Worcester to provide additional information on their requested premium hikes before the state renders a decision on their proposals. Each insurer sought hikes for multiple products, all offering a mix of deductibles and copays for small companies and individuals.

The approved rates were submitted by Blue Cross Blue Shield of Massachusetts, Neighborhood Health Plan of Boston, and two Connecticut-based insurers: Aetna and ConnectiCare. Blue Cross Blue Shield is the corporate parent of HMO Blue. The higher rates took effect immediately.

Three other insurers — Tufts Health Plan, United Health Plan, and Health New England — didn’t submit rates for the summer period.

Executives at Blue Cross Blue Shield, the state’s largest health insurer, said they were evaluating the request for more data. But they were not pleased by the eleventh-hour request.

“We filed the rates with a huge amount of information on June 1,’’ said Jay McQuaide, vice president at Blue Cross Blue Shield. “And we haven’t heard boo from them. On the day the rates would be effective, we get a request for a lot of additional information. It raises the question of what the intent is behind their request.’’

Fallon executives said they didn’t receive the state’s request for more data until late yesterday. “At this point, we’re taking a look at the list of information they’re asking us to provide,’’ Fallon spokeswoman Christine Cassidy said last night. Harvard Pilgrim spokeswoman Sharon Torgerson said the insurer is reviewing the state request.

But a small business advocate applauded regulators for not bowing to insurers. “They’re signaling that business as usual for big health care cannot go on in this economy,’’ said Jon B. Hurst, the president of the Retailers Association of Massachusetts, which represents 1,300 small companies. “They have to understand that consumers and small businesses can no longer write a blank check.’’

After Murphy made good on Patrick’s promise to reject health premiums on April 1, six insurers filed a lawsuit seeking to reinstate their proposed increases.

Suffolk Superior Court Judge Stephen E. Neel turned down their request for a preliminary injunction on April 12, instructing them to exhaust administrative appeals within the Division of Insurance before returning to court. Those appeals continued through the spring and, in the first ruling, an appeals panel made up of three division lawyers last week overturned the Harvard Pilgrim rate cap.

Appeals by Blue Cross Blue Shield, Tufts Health Plan, and Fallon Community Health Plan are pending, with decisions expected over the summer.

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

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