Jon Hurst
Retailers Association of Massachusetts

Thanks for your thoughtful comments in response to my posting. A few thoughts in return:

Glad you agree with the suggestion about reporting membership. Love to see MAHP and the plans take the lead on this.

I’ve been out of town for a few weeks so I might have missed the return of rate regulation to the nongroup and small group markets. If it happened, I’m delighted. But I suspect not. Plans certainly are subject to a range of limits on the rating methodologies they can use, and there are some toothless token limits on rate increases. But there’s been no detailed public review of premium increases for years. There’s not even really much detailed public information on rates. I might be able to call HPHC or another plan and get a premium quote, but that doesn’t tell me anything about the components of the rates, let alone that the rates are regulated in any way.

I’ll look at the New Hampshire report to see what they analyze and whether we could produce something similar in Massachusetts from what’s filed here. I know that I don’t find the health plans reports detailed or standardized enough to produce any meaningful comparisons of spending, beyond medical expenses and administrative expenses, and even there the comparisons aren’t really comparable because different plans pay and record capitated payments to providers in different ways.

I think there’d be enormous value in having more public information about profitability by line of business. It would help shed light on which lines of business are most profitable, and who’s subsidizing and being subsidized. The average profit margin for most of the plans is in the 2-4% range, as you note, but there’s lots of variability across lines of business. For example, I’m intrigued (as are MedPac and others) about how much money most of the plans are making on Medicare Advantage, and how these profits are in some cases subsidizing group business. Here are my figures for 2006 for three of the big plans in Massachusetts:

HMO A: Margin on group: -0.4% Medicare margin 5.9%

HMO B: Group margin 1.6% Medicare 3.4%

HMO C: Group margin 0.6% Medicare margin 6.7%

(And this is just underwriting margin with no allocation of investment income.)

I’d love to see a comparable comparison for nongroup, small group, large group and self-insured businesses. But there are no data with which to do these comparisons at the moment. Maybe there are in fact no big differences in medical expense ratios and profitability across lines of business, but I will remain a doubter until I see the information.

Finally, I agree completely that most of the premium dollars are in medical expenses. As I often say, even if we eliminated all administration expenses from health plan premiums, with current trends the rates would be back at the same level in less than two years. So finding ways to control costs is essential. Wish I had politically viable and culturally compatible answers to that challenge. Transparency is a place to begin the conversation but it’s not going to be the solution.

Best regards, Nancy

Great post. Thanks! I’ll add a link to your post.

That said, I’m not sure what public purpose is served by her request for profitability data on each line of business. Our pricing is already regulated in the small group and individual markets, and any employer, individual or broker who wants a price quote from a carrier can get one. And in a state where the aggregate margins of the health insurance carriers are pretty small – somewhere between 2-4% of all revenue across all lines of business, it’s very hard for me to see how this information would add anything to the public debate. Some employers pay more for health insurance, and some pay less, but that’s almost always based on the relative medical costs of their employees, not on big differences in health plan profit margins.

As far as where the premium dollar goes, I think the Division could already calculate and prepare reports that would answer this question based on what is currently filed. New Hampshire does that each year with the information it gets from the plans, and its filing requirements aren’t materially different. If the Division needs more information to report on where the money goes in MA, requiring the plans to submit data that would make it easier to do so is a good idea.

In the end somewhere between 85 and 90 cents of the premium dollar goes to health care services, not health plan administration, and it is the increases in the cost of health care that are driving the increase in health insurance premiums. As I’ve said before, more public information on what’s driving medical expense trend is a good thing, and that’s true here, too. However, I would urge us to avoid having multiple efforts geared at the same thing going on at the same time. The new Health Care Quality and Cost Council is also supposed to begin collecting information to answer the “where’s it all going?” question. Maybe we should start there.

I think you’re right, moving to Canada makes more sense than buying into this universal insurance mess!