Mass. Agency Limits Health Premium Increases

Massachusetts regulators issued their first batch of health care price controls on Thursday, rejecting the vast majority of small business health premium increases sought this year by the state's major insurers.

Insurance Commissioner Joseph Murphy said he had disapproved 235 of 274 proposed rate increases because they included "excessive increases and rates unreasonable relative to the benefits provided."

The head of a group representing insurers, health care providers and an array of area businesses, termed the action "arbitrary and capricious" and said it would hurt insurance companies because they already have negotiated contracts with health care providers.

Michael Widmer, president of the Massachusetts Taxpayers Foundation, added: "The administration is seeking a quick fix, but this will only compound the problem."

Murphy's decision covered all 19 of the plan increases proposed by Blue Cross Blue Shield of Massachusetts, 63 of the 64 plan increases proposed by the Blue Cross HMO, all 47 proposed by Fallon Community Health Plan and all 36 proposed by Tufts Health Plan. The 33 plans offered by three out-of-state, for-profit insurers — Aetna, ConnectiCare and United HealthCare — all were approved. Each does relatively little business in Massachusetts.

Policyholders who have already made a premium payment under the disapproved rates will receive a refund or credit.

Insurers say caps on their charges are justified only if there are similar caps on the costs that health care providers — such as doctors and hospital networks — charge them. That is the subject of pending legislation.

Insurance industry spokesmen were seeking a copy of the decision before commenting. Details were not immediately available, because the division only issued a news release and not its actual findings.

The announcement had political overtones: Gov. Deval Patrick is seeking re-election this fall against a field that includes Republican Charles Baker, the former president of Harvard Pilgrim Health Care.

Patrick is staking himself out as the guardian of small businesses and middle-class voters, and trying to cast Baker as an industry protector. The governor argues that small businesses are limiting their hiring because they cannot cope with double-digit health care premium increases.

"Now, the big insurance companies will criticize this action," he said while addressing workers at a clock-making company in Chelsea. "But the fact is that for three years now, both they and health care providers have sat around the table talking the issue of excessive cost to death and coming up with no solutions. Small businesses and working families cant wait any longer."

Baker has argued that he has been a leading advocate of more transparency in the relationship between provider costs and industry premiums, and his aides have accused Patrick of engaging in election-year market controls to boost himself politically.

Twenty-five of the 26 increases proposed by Harvard Pilgrim were rejected.

Patrick aides sought to bring attention to the governor's announcement by inviting reporters to his appearance at the Chelsea Clock Co. It occurred moments after the Division of Insurance released its statement.

The theatrics harkened back to testimony Patrick gave last month before a legislative committee reviewing the provider cost-increase cap. Aides also assembled reporters for that event, and Patrick emerged to accuse Baker and Treasurer Timothy Cahill, waging an independent run for governor, of inaction on the issue.

The insurance division disapproved the rate filings through an emergency regulation announced by Patrick in February.

Previously, carriers filed rate changes before or on the effective date of the new rates for businesses with 50 or fewer employees. The amended regulation required that carriers file small-group rates 30 days before their effective date and that additional actuarial information be included with the proposed rate changes.

Patrick said that would enable the Division of Insurance to perform an in-depth evaluation of the proposed rate changes and to determine their reasonableness. He preemptively announced it would be hard to justify anything larger than a 3.2 percent rate of consumer medical inflation.

In a statement, the insurance division outlined three problems it found:

— The filings failed to illustrate how the carriers pay similarly situated providers differing reimbursement rates based solely on quality of care, mix of patients, intensity of services and geographic location.

— The filings failed to demonstrate that insurers have renegotiated provider-reimbursement rates.

— The filings were "significantly above" the medical consumer price index and insurers did not adequately explain why.