Medical
insurance hikes loom in Mass The state's four major health insurers
plan premium increases of more than 10 percent for most of their insurance products
in 2007, the seventh consecutive year of double-digit hikes.
Some employers
are expected to react by switching to health plans with higher deductibles or
by increasing copayments and making other changes that will result in additional
out-of-pocket expenses for employees.
The projections for next year's rates frustrated Massachusetts
healthcare executives, who said they have been making efforts in recent years
to rein in rising costs related to doctors' pay, drug spending, high-tech imaging,
and surgery.
"I feel like Bill Murray in the movie 'Groundhog Day,'
" said Stephen Booma , executive vice president of Blue Cross and Blue Shield
of Massachusetts, the state's dominant health insurer, with about 3 million members.
"I'm waking up again and telling you the very same thing I did last year
and the year before that."
Brian Pagliaro, vice president of sales
for Tufts Health Plan, said, "All things being equal, everything we paid
$1 for last year costs $1.10 now."
In recent years, insurers have used
a variety of strategies to curb healthcare spending. Many now offer tiered pharmacy
benefits, which use lower copayments as a way to encourage members to choose generic
drugs that are less expensive. They also have attempted to make doctors limit
the number of costly imaging tests they order, such as positron emission tomography
and MRI scans.
Tufts Health Plan, which has about 600,000 members, even
requires doctors to obtain approval before recommending a hysterectomy or lower
back surgery.
So far, the cost-containment efforts have had only a minimal
impact, said Stuart Altman , dean of the Heller School for Social Policy and Management
at Brandeis University .
"We're throwing pebbles at a tank," he
said. "I would have thought healthcare costs would be growing closer to 6
percent or 7 percent."
Increases are expected to be higher in Massachusetts
than in other parts of the country. For example, health premiums increased about
9 percent nationally in 2005, according to the Kaiser Family Foundation, compared
with an average increase of more than 10 percent in Massachusetts. The high concentration
of academic teaching hospitals in Boston -- which typically provide advanced and
expensive services and treat patients with complicated conditions -- contributes
to the disparity, according to healthcare specialists.
Vin Capozzi, senior
vice president of sales and marketing for Harvard Pilgrim Health Care, the state's
second-largest insurer, with about 975,000 members, said its rates will increase
7 percent to 13 percent in 2007. Those members whose health plans offer better
coverage and a broader array of benefits will face the biggest increase, he said.
Capozzi attributed part of the increase to the aging of the post-World War II
generation.
"Baby boomers are demanding a lot of services, and that's
driving costs," he said. Insurance company executives said baby boomers expect
better medical care than previous generations.
In addition, Capozzi said,
insurers like Harvard Pilgrim face routine annual cost increases from doctors
and hospitals they contract with to provide medical services.
Eric H. Schultz,
chief executive of Fallon Community Health Plan of Worcester, which has about
190,000 members, said he anticipates premium increases of 6 percent to 12 percent.
The
state's four-largest insurers are nonprofits and use surplus income to control
rate increases or build investment accounts that can provide them with income
in unprofitable years. Blue Cross said this year that it was reducing its target
profit margin because it had built up substantial reserve funds. The three other
major insurers have posted modest profits in recent quarters, but much of it has
been from investment income, not health insurance business. Unlike automobile
insurance, health insurance rates are not regulated by the state. Increases in
costs still are largely passed to employers, who purchase most health insurance
plans.
Insurers have worked especially hard to tamp the escalating costs
of prescription drugs. Some of those efforts, such as tiered pharmacy benefits,
have succeeded. But Schultz and other healthcare executives said increased demand
for expensive biotechnology drugs aimed at small populations of patients are leading
to a surge in spending for prescription drugs. Such drugs include Genzyme Corp.'s
Cerazyme, an enzyme-replacement therapy that treats Gaucher disease, a rare genetic
disorder. Fewer than 5,000 patients worldwide are treated with the Cambridge company's
drug, but it can cost $200,000 or more per patient annually. Those costs eventually
are reflected in insurance premiums.
"These drugs are emerging as a
high-growth cost challenge for the healthcare industry," said Schultz.
Tufts
Health Plan expects a 10.2 percent premium increase for health maintenance organizations,
which limit subscribers to designated doctors and hospitals, and an 11.5 percent
increase for preferred provider organizations, which are more flexible. Pagliaro,
the Tufts sales executive, said the company's 2007 increases will be slightly
lower than this year's.
The continued price increases are taking a toll
on employers and their workers, many of whom have not had pay raises large enough
to offset the escalating insurance costs or the rate of inflation, which is about
4 percent this year.
"It's becoming increasingly difficult for employers
to offer health insurance for employees when the rates have essentially doubled
in the last seven years," said Richard C. Lord , chief executive of Associated
Industries of Massachusetts, the state's largest business lobby.
Drew Altman,
chief executive of the Kaiser Family Foundation, an independent nonprofit that
studies healthcare issues, said that continued healthcare premium increases are
a significant burden for working families.
"What average working people
pay out of pocket for premiums has been going up four times faster than wages
in recent years," Altman said.
