State rejects small biz insurance rate hikes
04/01/2010
By Julie M. Donnelly, Boston Business Journal
The state Division of Insurance has rejected a majority of insurers’ proposed health-premium increases for small businesses, sending a message that Gov. Deval Patrick’s administration is going to play hardball with the insurance industry over rate hikes that have reached 50 percent for some small businesses.
The move is a rare rebuke for the state’s insurers, as past rate hikes have essentially been rubber stamped by state regulators.
Last month, Harvard Pilgrim Care Plan officials told the BBJ they would be filing base-rate increases for small businesses of between 8.3 percent and 11.7 percent, while Blue Cross Blue Shield of Massachusetts said its small business rate increases, on average, would be in the mid-teens.
The state's action will create a raft of new paperwork for the insurers, who are required to reimburse small businesses for rate increases they have already paid, and will likely spawn a rash of appeals from insurers.
The DOI disapproved 235 of the 274 rate increases filed by health insurers for small businesses. Insurance Commissioner Joseph G. Murphy disapproved the base rates after they were found to include excessive increases, he said.
Patrick, as part of a jobs initiative he launched at the beginning of the year, authorized the DOI to require insurers to turn in proposed rate increases in advance and to reject any deemed unreasonable. The governor set the benchmark for “excessive increases” at 150 percent of the Consumer Price Index for Medical Services, which rose 3.2 percent in 2009.
The DOI issued letters to the health plans today, explaining the reasons for the disapprovals. One of the key reasons for the rejections was a failure to explain the reasons for differing reimbursement rates for different medical providers.
The lack of pricing consistency among providers and their reimbursement rates was demonstrated in two recent reports, one by state Attorney General Martha Coakley’s office and the other by the Division of Health Care Finance and Policy. The AG’s report found that a hospital’s clout, in terms of market share, was most likely to determine its reimbursement rates.
The rejection letters also stated, in some cases, that the insurers failed to renegotiate these rates.
This action by the DOI follows several weeks of hearings that included testimony from insurers, providers and small business owners.
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