Health insurance deductibles in Massachusetts surged by more than 40 percent between 2009 and 2011, a period when health benefits were reduced by 5 percent and premiums rose by nearly 10 percent, according to a new state report on market trends.
At a briefing, Center for Health Information and Analysis (CHIA) Executive Director Aron Boros said premiums are outpacing inflation and state officials “see the quality of the benefit declining.” He said, “This is the paying more, getting less headline. We see this throughout every group in the market.”
The center’s report also concluded that a few large payers are dominating the commercial health insurance market and that 80 percent of the commercial health care payments to acute care hospitals and physicians were made to high-priced providers, including Partners HealthCare System, which accounted for a quarter of physician group payments and a third of overall commercial payments to acute hospitals.
The report underscores the challenge of bringing health care cost increases in line with economic growth and realizing the billions of dollars in savings officials promised last year when they passed a law aimed at bringing costs down through care delivery and payment reforms. Boros said the new law is “already influencing the market,” adding, “This data doesn’t reflect anything that happened after that law passed.”
The state Health Policy Commission, created under the 2012 health care cost control law, views the report as helpful to hearings it has scheduled for October 1 and 2 at UMass-Boston, where stakeholders in the market will be called upon to answer questions about cost trends.
The report also found that 97 percent of the state’s 6.6 million residents held some form of health insurance coverage each year from 2009 to 2011, a level of coverage that the state describes as “near-universal.” That means about 198,000 are uninsured each year in Massachusetts.
Health insurance in Massachusetts is mandatory under a 2006 law and individuals pay penalties to the state if they fail to have coverage. The percentage of uninsured fell to 2 percent in 2010 from 2.7 percent in 2009, but rose to 3.1 percent in 2011.
The report determined 62 percent of state residents receive coverage through employers, while also quantifying a shift to public coverage. The percentage of residents with employer-sponsored insurance fell to 61.8 percent in 2011, from 67 percent in 2009. The percentage receiving coverage through Medicaid rose from 15 percent in 2009 to 17.4 percent in 2011 and the percentage on Medicare rose from 15.3 percent in 2009 to 17.7 percent in 2011. Boros told the News Service affordability and unemployment were drivers behind the shift to public insurance.
Among insurers, Blue Cross Blue Shield accounted for 45 percent of commercially insured enrollees and combined with Harvard Pilgrim Health Care and Tufts Health Plan to cover 80 percent of that market. The three insurers also had the highest average premiums between 2010 and 2011, the report said.
Even with the steep increases, deductibles in Massachusetts are still just below the national average, according to the report, although enrollees with employer-sponsored plans contributed about 25 percent towards their annual premium, higher than the national average employee contribution. “It’s clear that patients increasingly have skin in the game,” Boros said.
The average Massachusetts health plan premium of $421 per month in 2011 was up 5.2 percent from 2010 and 9.7 percent compared average premium of $384 in 2009.
The fee for service payment model, an approach policymakers are trying to steer the market away from due to its role in driving up costs, was the dominant payment method in 2012, accounting for 64 percent of commercial payor enrollee health service payments.
Massachusetts Association of Health Insurers President Lora Pellegrini said the report’s finding about care being delivered in high-price settings confirms “what we’ve known and suspected all along.” While hospitals and insurers negotiate rates, Pellegrini told the News Service “the leverage is really with providers” in part because insurers need to have higher-priced providers in their networks.
The report also found a big increase in the portion of premiums not used on medical expenses, with the amount retained by six major insurers for administrative, information technology and other expenses increasing by more than 20 percent each year between 2009 and 2011, to a total of $1.17 billion.
Asked about the rise in insurer “retention” costs, Boros said, “We suspect that one of the reasons is that over this period, nationwide, we saw lower utilization than we expected.” Saying “premiums are set prospectively,” he added, “It does not imply poor management or malice on the part of the insurers.”
Pellegrini said spending required under federal and state directives, such as on information technology and initiatives to overhaul payment models, factored into the increase in premium spending not directly related to medical expenses.
The primary CHIA staff contributors to the report were senior health policy analysts Cristi Carman and Kevin McAvey, manager of special projects Elizabeth Arnold and director of health system finance Po-Yu Lai. The center early next year plans to examine public insurance programs.