How About Some Transparency for Health Plans, Too? by Nancy Turnbull

Maybe I’ve had too much free time while on vacation in Wyoming (where 18% of adults and 10% of kids are uninsured), but I’ve been thinking about transparency. The latest infatuation of many pundits in health care, transparency is the notion that if consumers have more information on costs and quality, they’ll become a potent new force for improving care and moderating health care spending. Although I am deeply skeptical that transparency will have any real impact on costs (a topic for another blog entry), I think consumers should know much more about the quality and cost of their health care. But while we’re pushing transparency in health care, let’s not forget about health plans. In the new world of health reform, there’s lots more we need—and are entitled —to know about where our health insurance dollars are going.

Health plans are perhaps the biggest “winner” in Chapter 58: they are likely to get hundreds of thousands of new members, both from the expansions of public coverage through Medicaid and Commonwealth Care and from a growth of private coverage because of the individual mandate. Most people in the state are now required to purchase health insurance or pay tax penalties. Since buying health coverage is no longer really voluntary, the public has a right to know much more about the health insurance system. And health plans should expect to be subject to a much higher level of accountability to us for the prudent use of our money.

Licensed health plans in Massachusetts have long been required to report a variety of information to the state Division of Insurance. Other public entities, including Medicaid and the Group Insurance Commission, get regular reports from the health plans with which they contract. The Attorney General also requires health plans that are public charities to file annual “community benefit” reports. All of reports contain useful and important information (although synthesizing data from so many disparate sources is difficult and frustrating). But even with all of this reporting, there are many critical gaps in what we know about health plans in Massachusetts.

Here are a few ideas for what I’d like to see reported regularly (perhaps by the Division of Health Care Finance and Policy, which already produces a variety of other monitoring reports?), and in a format that’s readily accessible to the public.

How many people are covered by each health plan? This seems like such an obvious and simple piece of data. But most of the licensed health plans in the state do not report the total number of people they cover in Massachusetts to any public agency. Instead, most plans report only the number of people covered by insured (as opposed to self-insured) plans). For many years, health plans did report their total membership but this requirement was eliminated by the state Division of Insurance a number of years ago, for reasons that never made any legal or policy sense. It’s high time to require all plans (including the Boson Medical Center HealthNet Plan and Network Health) to report their total membership.Financial results by line of business: We’ve long known that different types of customers have different levels of negotiating power with health plans. Large employers have the most clout, and generally get the best financial deal. Smaller employers don’t do as well, and individuals who have to buy coverage directly from health plans fare worst of all. In recognition of the lack of market power of individuals, the state used to regulate nongroup premium rates. But in the 1990s, as part of our romance with competition, we effectively eliminated any real oversight of premium rates. I’m a supporter of bringing back much more oversight in this area. But at the very least, we should be able to examine how profitable each line of business is for each individual health plan: the new merged individual/small group market (including results for products sold inside and outside the Connector), the market for larger insured groups, and the self-insured market. If most of us are going to be required to purchase health insurance, we have a right to know who’s subsidizing whom, or being subsidized, and by how much.

Health plan profits: In 2006, the combined profits of the health plans operating in Massachusetts exceeded $430 million. In the three year period 2004-2006, aggregate health plan profits were more than $1.2 billion. At the end of 2006, the aggregate reserves/surplus of the state’s health plans exceeded $2.6 billion. By any measure, that’s a lot of money. Every major health plan in Massachusetts is a state-based, not-for-profit entity. Because of this, and the new requirements that most of us buy health insurance, it’s appropriate that we develop a better understanding of the financial performance and condition of health plans, so that we can have a long overdue public conversation about the accountability of health plans to use their substantial resources for the benefit of the public. While many health plans have undertaken laudable initiatives in a range of areas, it’s likely that we could make greater advances in health improvement by working together than by having each health plan work individually on its own favorite project, be it improving the quality of medical care, promoting transparency of cost and quality information, improving care for members with certain chronic illnesses, funding greater adoption of electronic medical records, or even expanding health coverage.

Understanding the reasons for premium rate increases: We all know health insurance premiums are rising at annual rates that far exceed overall inflation. But it’s almost impossible to get any regular credible detailed public information from any Massachusetts health plan to help us understand why premiums are increasing: is it increases in prices and/or use of inpatient hospital services? Outpatient care? Physician services? Prescription drugs? Imaging? Administrative expenses? This lack of information makes it impossible to know the causes, let alone any potential solutions, for rising health insurance costs. Since most of us experience health care costs most directly through our health insurance premiums, this type of information could help us become more engaged participants in a much needed public discussion about approaches to controlling health care costs. As a place to start, the Connector could begin providing detailed information, in a standardized format, about components of premiums (including detailed information about administrative costs), and the causes of premium increases, for Commonwealth Care and Commonwealth Choice products.

Health plans are among the most enthusiastic advocates of transparency in health care. As health reform continues to be implemented through the imposition of a mandate on most of us to purchase private coverage, this same level of transparency should be extended to health plans, too. With more understanding and public accountability, about where our health insurance dollars are going, we might really begin to be able to dig into the difficult but critical task of moderating cost increases so that we can sustain the progress we’re making on expanding health coverage.

Nancy Turnbull, Harvard School of Public Health