Amen John!! Small employers and individual consumers deserve some action and answers. And correct me if I’m wrong John, but I don’t believe the insurers do have to file their rates for large group, only small group. So how are we supposed to know whether the little guy is getting a fair hand, or is in fact subsidizing the discounts of big business and big government purchasers?!? The other “required” insurance coverages (auto and workers comp) both appear to be far more regulated and more transparent than health insurance, yet those coverages cost consumers far less. Why is that? Do we hold the health insurers to a different standard because they are “non-profit?” Recent press reports on compensation would suggest that they deserve a closer look. Same obviously goes for our “non-profit” hospitals, and the lack of questioning over their incredible building and expansion projects of late. I’m waiting for the day in which “non-profits” like Partners and Blue Cross/Blue Shield set their rates under the sunshine of public or regulatory scrutiny.

Jon Hurst
Retailers Association of Massachusetts

John & Jon – Since you asked, let me respond to your comments, questions and observations on behalf of Harvard Pilgrim.

First of all, we never said there would be a “coverage dividend.” The uninsured have not been a huge part of the private cost of health care in Massachusetts, because state and federal funds pay for the Uncompensated Care Pool and a relatively generous Medicaid program. The biggest cost shift is Medicare underfunding – which I’ve blogged on at http://www.letstalkhealthcare.org many times. Private payors in MA pay providers anywhere from 115 to 140 percent of Medicare for many services. This is big-time cost shifting, and health care reform doesn’t touch it.

Second, we said merging individual coverage with small group coverage would reduce rates for individuals – which has happened – but would raise rates for small groups – by far more than 1.4% – which by the way, comes on top of whatever medical inflation is at the time. Unfortunately, we lost that debate during the policy making process.

Third, I blogged the day of Senator Murray’s speech about having public hearings if health insurance premium increases were over 7%, and said I thought it would be a good idea. Many of my colleagues in the industry agree. The vast majority of the premiums we collect pay for health care services – anywhere from 87% to 90% of every dollar. If public hearings would improve people’s understanding about this, we’re all for it.

Fourth, auto and worker’s compensation insurance is not like health insurance. Auto insurance rates have stabilized for many reasons, but one of the biggest ones is enormous improvements in automobile design and safety over the past 15 years, and the public “war” against drunk driving. Worker’s Comp has also been affected by profound changes in workplace safety and the nature of work in Massachusetts. In both cases, the public supported most of these changes.

Health insurance is different. People don’t want to be told what to eat, what to weigh, how much to exercise, or where they can go for services. This makes replicating what works in those areas very hard to duplicate in health insurance. In fact, when health insurers did use many of the tools and techniques that succeeded in bringing down workers comp rates in the 1990s, the state passed legislation forbidding health insurance plans from continuing to use them.

I’m all for more transparency – and have been for quite some time. But Harvard Pilgrim never talked about a coverage dividend, and never said merging non-group and small group would save small employers money.

As you know Charlie, we also strongly opposed the non-group and small group merger. It was cost-shift in the making for small employers, much like discounts for big purchasers potentially squeeze us in the other direction.

[...] at WBUR’s CommonHealth website on rising health insurance premiums in Massachusetts — click here. Jon Hurst, head of the Retailers Association and Charlie Baker, CEO of Harvard Pilgrim Health [...]

Charlie, No one said the market merger would save small businesses money. But you seem to be implying that the nongroup-small group merger is a major factor in rising premiums for small groups. What’s the evidence? What are you seeing in HPHC’s book of business?

There are a few flaws in the in the initial post and the first response, and they are glossed over but not identified in charlie’s response.

If you want to compare different types of insurance(auto, comp, and health), you are dealing with the flawed model of Mass health insurance. Let’s compare it to auto. It’s the easiest to digest.

Auto insurance pricing is based on driving record, vehicle driven, types of optional coverages chosen. Health insurance is based upon age, zip code and sometimes profession. Health insurance has the healthly gym rat paying the same as the overweight, diabetic alcoholic smoker.

Auto insurance has lower rates for good drivers. In health insurance there is no incentive to be healthy. There is no price break. With the way the system is designed, you should go to the doctor every time that you have a cough. Better make sure that the snifles aren’t going to turn into strep throat.

If I get a speeding ticket, my auto rates go up. If I decide to eat all my meals at a fast food restaurant, I will most likely gain weight and develop all sorts of health issues. But my health rates do not go up.

Auto insurance only is utilized when there is an incident and deal with issues that crop up after an accident. Health insurance, more specifically HMO and PPO, deal with issues both before and after an accident.

Auto insurance would be outrageously expensive if it were expected to cover oil changes, tire rotation, car washing and waxing, tune ups, etc. These items have nothing to do with risk. They are preventative.

Health insurance is expensive because it contains a preventative element. Most preventative has nothing to do with risk. People either get preventative care or not. If premiums were lowered 10-15% and physicals were covered every 2 years as opposed to every year, or better yet, make them an optional rider. If you want a physical every year, change them 5% more premium or whatever the actuaries determine.

In auto insurance, you can raise your deductible without changing the plan. In health insurance, you can’t change your deductible without altering the entire structure of the plan. You raise the deductible and your RX pricing increases. How are those 2 issues related?

The only way to get costs under control are to incentivize the system. We need to increase pricing for those who choose to harm themselves by smoking and overeating. Maine, for example, is also guarantee issue but does change higher prices for smokers. This makes logical sense.

I’m not talking dramatic overhaul of the current system, but little tweaks that make people more responsible for their habits could drop premiums for those that actually are responsible and choose to take care of themselves. This would be very similar to being a good driver.

Amen, mandatory Health Is a Tax. You hit the nail on the head!

I’ll add another difference: People who are sick protest if their health insurance rates do go up, and protest when companies don’t cover pre-existing conditions.

Let’s compare this with auto insurance” Then, according to the pre-existing condiions whiners, I should be able to have an accident on Monday, not have collision coverage, and sign up with a new insurance carrier on Wednesday, buy collision coverage, and expect the new carrier to pay for the car damage incurred on Monday! Yeah, right!

insurance- something you have for UNFORSEEN or UNEXPECTED circumstances. Got it?

Thanks to Charlie Baker for responding. Charlie knows I am a longtime fan of his, so I appreciate his and everyone’s responses. My key responses/points:

1. Unless I’m misinterpreting, Charlie confirms that small businesses and their workers are paying a substantial “coverage penalty” for Chapter 58 generally and because of the merger of the small group and individual market (effective 7/1/07) specifically. Questions:
a. How much were HPHC premiums hiked for ’07 and ’08 because of the market merger?
b. Is it your impression that all MA insurance carriers increased rates because of the merger, or was HPHC in a unique position on this?
c. In December 2007, a special commission created under C.58 performed an actuarial analysis of the likely impact of the merger and concluded that small group rates would bump up only 1.5% on average – and nongroup premiums would drop 15% on average. HPHC had a rep on the commission (Gary Lin, Harvard Pilgrim Sr VP and Chief Actuary) who voted for the final report. What’s up?
2. Is there no favorable impact on HPHC premiums in spite of the influx of all those young and healthy folks into the insurance market from the individual mandate? None?
3. Charlie suggests there are no savings to private payers from reductions in hospital uncompensated care because that’s all public money. But hospitals have made clear for years that the Uncompensated Care Pool only reimburses them for a fraction of their real costs in caring for uninsured persons, and that those unreimbursed costs get shifted to everyone else. Moreover, the Pool mainly covered hospital expenses for folks 200%fpl that were shifted to non-public payers. No savings? None?
4. Finally, no suggestion on my part that auto and workers comp are apples to apples with health insurance. Here’s the point – where is the biggest crisis right now in Massachusetts insurance? It ain’t auto. It’s health. Does the state’s Division of Insurance know this? How about a sign? Do they need yet another law passed to take notice?

I would like to offer some comments on car insurance that have implications for health insurance. Here in NJ, we were the most expensive state for car insurance in the country for years until the mid to late 1990’s. Insurers were very tightly regulated, they could not make an adequate return, and quite a few either left the state entirely or cut back on the business they were willing to write here. I paid close to $1,000 per car (for two cars) for insurance at that time. NJ was one of two states that GEICO would not operate in because the business environment was horrible.

Finally, three things happened. First, regulations were eased to allow insurers more flexibility in pricing their product. Second, we got litigation reform in the form of a no fault law that compensated victims for accidents but did not allow lawsuits for pain and suffering except for a narrowly defined list of serious injuries. Drivers could preserve an unlimited right to sue if they paid a significant additional premium, but the vast majority opted for no fault coverage. Third, there was a serious effort to crack down on fraud including criminal rings that staged accidents and than sued for phony injuries. Now, about ten years later, I pay 30% less for car insurance than I did then. GEICO has been doing business here since shortly after the reforms took effect and currently has a series of commercials running touting another recent price reduction.

The key implications for health insurance are: (1) health insurance is expensive because healthcare is expensive, (2) sensible malpractice reform could reduce healthcare costs by reducing utilization driven by defensive medicine, (3) investing more to combat and root out fraud could further reduce costs, especially in the public programs (Medicare and Medicaid), and (4) the insurance industry is naturally competitive. As an industry, both its recent and longer term historical profit margins are average at best compared to corporations overall.

This current plan has major flaws.
We are self employed and self insured – which apparently has little representation. We pay our own premiums. Its now 1600 per MONTH with co-pays and deductibles and no dental. We cannot fully deduct the premiums paid on state nor fed income taxes. In addition we have to belong to a group to purchase it. We are just over the income cut off of 53k which is not a lot of money in this state.

Increase this year was 7 percent. Increase last year was 33 percent.

Has anyone thought about allowing the self employed to purchase into the same plan that municipalities and the state pays? We are not looking for a handout JUST the same pricing. I guarantee you that come this November we will vote to ELIMINATE the state income tax so we have more funds to pay for our family’s medical insurance UNLESS things change real soon. In addition I am considering going to the press to expose this major flaw in this highly touted plan across the nation.