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Leading Massachusetts health insurers and state regulators squared off in court Thursday in their dispute about acceptable health insurance premiums for a pivotal sector of the local economy: small-business owners.
The insurers argued the state's decision last week to reject nearly all of their proposed 2010 premium increases will cause "destabilizing" losses for them. The state said the insurers fundamentally misunderstand both the rate rejection and the way to resolve their dispute.
During a two-hour hearing in Suffolk Superior Court, an attorney for Blue Cross Blue Shield of Massachusetts and five members of the Massachusetts Association of Health Plans asked Judge Stephen Neel to issue a temporary injunction overruling the state's decision.
Attorney Dean Richlin also asked that the companies be allowed to collect the new premiums they had proposed be effective April 1 while a trial is held on the matter.
He said that requiring them to collect premiums at April 2009 rates, as he contended the state has ordered them to do, was "grossly unsound" and would create losses of more than $100 million in the next eight months.
"These are losses that will quickly mount up, and for some number of companies, the immediate losses will be destabilizing," Richlin said.
But an attorney for the state said the industry is misreading the rejection. He also asked that the claim be dismissed because the insurers did not seek a required administrative hearing before heading to court.
Assistant Attorney General David Guberman said the rejection would not force the insurers to collect at their April 2009 rates, as Richlin said, but instead at their most recent rates. They are generally recalibrated on a monthly or quarterly basis.
"There is very much less at stake here than plaintiff presumes," Guberman told Neel.
The question is central to the insurers' case, and Neel paused the proceedings so both sides could consult with a bevy of fellow attorneys in the courtroom before proceeding with the case. Richlin followed up by citing documents buttressing the April 2009 date.
The hearing occurred before a standing room-only crowd of more than 100 people, including the top legal counsel to Gov. Deval Patrick and representatives of the health insurance industry.
The state Division of Insurance rejected 235 of the companies' 274 proposed rate increases for a category including small businesses with up to 50 employees. The insurers were seeking base rate increases from 8 percent to 32 percent.
The rejection came after the governor publicly proclaimed that double-digit premium increases were preventing small businesses from adding jobs. Patrick said the state would consider rejecting any rates it deemed "unreasonable."
The insurers say their premiums can't be capped without similar limits on the charges issued to them by doctors, hospitals and other health care providers. Otherwise, the state will force them to take a loss. The Legislature is weighing cost control legislation.
Richlin revealed that regulators told the insurers — before they issued their rejections — that they would approve premium increases if they were limited to no more than 7.7 percent.
The administration contends that is the rate of inflation in the medical consumer price index.
The insurers argued, though, that no insurance actuarials would sign off — as required — on that figure.
Noting the state approved rate increases for three out-of-state companies that capped their hikes at 7.7 percent, Richlin said: "I don't think there could be a clearer case of agency misconduct and overstepping."
The debate is taking place in a politically charged atmosphere. Patrick, a Democrat, is seeking re-election this year, and one of his main challengers is Republican Charles Baker, the former president of Harvard Pilgrim Health Care — one of the plaintiffs in the case.
Before April 1, the state had not rejected any premium increase proposed by the industry, prompting allegations Patrick is trying to create an election issue with Baker.
Baker himself has labeled the rejection "an election-year gimmick," though he has refused to comment on the lawsuit.
Neel said he would try to issue a ruling by Friday, or, at the latest, the close of business Monday.
This program aired on April 8, 2010. The audio for this program is not available.
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