Massachusetts

This article is part of the State Status and News series related to the Patient Protection and Affordable Care Act.

The top health insurers in Massachusetts on Monday filed a lawsuit against state insurance regulators, arguing a premium rate cap imposed by the Patrick administration on small business health plans was arbitrary, politically motivated and could lead to losses in the “hundreds of millions of dollars.”

The filing in Suffolk Superior Court requested a hearing Thursday on a temporary injunction to suspend the cap, as well as a speedy trial by June 15. An administration official termed the lawsuit “an outrageous response.”

The administration imposed its cap last Thursday, complaining the industry was seeking premiums for businesses with up to 50 employees that included “excessive increases and rates unreasonable relative to the benefits provided.”

Gov. Deval Patrick has argued such increases are stifling job growth, as small businesses choose between hiring new employees and paying larger health premiums for existing ones. He is also supporting legislation aimed at controlling the charges that hospitals, doctors and other medical providers can pass along to insurers.

Insurers say capping their premiums without controlling costs addresses the effect without dealing with its cause.

“Last week's decision by the Division of Insurance to set an artificial cap will do nothing to fix the real problem of rising health care costs,” said a statement issued by the Massachusetts Association of Health Plans, which filed the lawsuit on behalf of Blue Cross Blue Shield of Massachusetts and five association members: Fallon Community Health Plan, Harvard Pilgrim Health Care, Tufts Health Plan, Neighborhood Health Plan and Health New England.

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A lawyer representing the insurers argued the commissioner's action was illegal because it ordered the insurers to keep their rates at prior levels — disallowing any increase.

The attorney, Dean Richlin, also labeled the medical CPI “an arbitrary standard” that did not account for emerging medical technologies or new drugs, as well as predicted patient loads.

He said the result will be a “short-term problem with solvency,” as well as collective losses for the insurers estimated at “hundreds of millions of dollars.”

In their lawsuit, the insurers asked that their proposed rate increases take effect as had been planned on April 1. Alternatively, they asked that while a trial is being held, the difference between the premiums they asked to charge, and the ones the state said they could charge, be put in an escrow account awaiting a verdict.

Otherwise, Richlin said, the small businesses Patrick said he was trying to protect could face the risk of an even higher increase, should the insurers win their claim and be forced to recover any losses suffered during cap.

“Businesses may get a short-term break in rates (from the cap),” said the attorney. “But if, was we feel, the commissioner is wrong, businesses may have to make up the differences in the rates.”

Johnson, Glen. “Mass. Insurers Sue to Block Rate Hike Decision”. Associated Press (via Google). April 5, 2010. Available online as of 2010-04-06.

Suffolk Superior Court Judge Stephen Neel plans to make a decision today in a high-stakes showdown that has pitted the Patrick administration against the state’s six largest health insurers.

The dispute centers on who has the right to determine how much the nonprofit insurers can charge small groups for coverage.

“I’m going to commit to making a decision by the close of business Monday,” Neel told the people in his packed, 10th-floor courtroom after two hours of arguments.

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The dispute has captured national attention, since Massachusetts has been held up as a model for national health-care reform.

Gov. Deval Patrick is facing serious challenges from Republican candidate Charles Baker, the former chief executive of one of the firms now suing the state, and Treasurer Tim Cahill, an independent candidate who has been a vocal critic of the cost of health-care reform.

Yesterday in court, Dean Richlin, the lawyer for the insurers, said using the 2009 rates would force the already money-losing insurers to lose even more money this fiscal year.

The rates rejected by the state, he said, “take into account pharmaceutical, technical and medical changes.”

But Barbar Anthony, the state’s undersecretary of consumer affairs and business regulation, said the state couldn’t verify those losses.

She said the state was on firm legal ground when it denied the proposed 2010 rates, and she criticized some of the insurers for filing a lawsuit before appealing the commissioner’s decision.

“You have to exhaust the administrative remedies before going to court,” she said.

Richlin, in a post-hearing press conference, said the insurers went straight to court because time is of the essence.

“The administrative process will take time,” he said. “The harm is now.”

McConville, Christine. “Judge vows quick decision in health insurance dispute” Boston Herald. April 8, 2010. Available online as of 2010-04-08.

State Rep. Jeffrey Perry, a Republican candidate for 10th Congressional District, wants Massachusetts to join the legal fight against federal health care reform.

In a letter hand-delivered to Attorney General Martha Coakley's office Monday, Perry asked her to consider joining the 14 other attorneys general across the country who have signed on to a federal lawsuit challenging the constitutionality of the recently passed law. At issue is whether the federal government can require people to purchase private health insurance or face penalties.

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Perry dismissed the political jabs saying he waited two weeks hoping Coakley would join the suit without prodding. He said he is pushing to protect state's rights.

The commerce provision allows Congress to regulate the insurance industry, Perry said. Requiring individuals to purchase health insurance doesn't rise to the level of interstate commerce, he said.

Joseph Malone, a Republican primary opponent, declined to comment on Perry's letter, but another political foe said he did support Perry's initiative.

“It is unconstitutional. (The health care law) was written for and by the insurance companies and pharmaceutical companies,” independent candidate Peter White said. “It's a bad bill with limited coverage and high co-pays. It's just going to make the rich richer.”

Another of Perry's primary opponents said he agrees with the concept, but it's not likely to fly in Massachusetts.

“Obviously she's not going to do that,” Ray Kasperwicz, a Cohasset Republican running for the seat, said of Coakley. “It's a valid argument. In any way we can, we should fight this (law).”

Brennan, George. “Jeffrey Perry seeks fight on federal health care reform”. Cape Cod Times. April 7, 2010. Available online as of 2010-04-08.

Gov. Deval Patrick’s administration, and the state’s Division of Insurance, made headlines recently when they announced they had shot down nearly all of the small business health insurance rate increases planned by insurers, including Worcester-based Fallon Community Health Plan.

The bold move to reject the premium hikes was so ill-received that insurers banded together to sue the state.

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The debacle for brokers began in mid-February when Patrick enacted emergency legislation requiring that health insurers submit rate increases for small businesses 30 days before they go into effect to allow the Division of Insurance a chance to review and possibly reject rates.

After reviewing rate requests that ranged from 8 percent to 35 percent hikes, the division, led by Commissioner Joseph G. Murphy, disapproved 86 percent of the increases on April 1.

Insurers immediately cried foul and four days filed a suit against the state in Suffolk Superior Court in Boston, alleging that the state has acted beyond its power and has set artificial rate caps.

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With DOI’s decision to disapprove rates and the subsequent lawsuit, McDonald said his company and clients have been left with no idea how much they’ll have to pay in health insurance premium this year.

“That creates a tremendous operational challenge for all parties,” McDonald said.

According to Commissioner Murphy, some businesses are being charged rates that have been disapproved by the state and others are being charged the previous rates that were established before the increases were applied for.

Other insurance brokers are questioning the state’s rationale behind disapproving almost all of the rate increases that were requested. Four of the state’s insurers had all of its rates rejected while another 2 had all but one of the increases rejected. Three insurers had no rates thrown out.

David Shore, a vice president at the Protector Group in Worcester, said if the end goal of the state is to lower health care costs, then disapproving insurance rate increases is not the way to do it. Insurance rates, he said, reflect about 90 percent of the cost of providing health care, with insurers taking about 10 percent for administrative costs.

“Obscene prices are the result of many factors, not just the insurers,” he said.

Increases, he said, arise in part because the cost of medical care is rising. If insurers are not allowed to cover their costs then they could, in a dire circumstance, go out of business.

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“We can’t let ourselves get distracted from the job at hand, which is reducing costs,” Anthony said. “We’re hearing excuses, rationales, invented chaos and manufactured disruptions to throw us off the path that we need to be going on, which is reducing costs for small businesses.”

Other brokers say there are a multitude of factors that have lead to costs rising for insurers.

For example, in 2006, the state enacted its own health care reform, mandating that all residents have health insurance. But, some brokers argue that the penalties for not having insurance are not strong enough, causing some residents to not purchase health insurance, and only get it when they are sick, leading to increased costs for the whole system.

Also, the 2006 reforms merged the individual insurance market into the small business market, which could be contributing to the increases in small business insurance rates. Other brokers say the mandated care that insurance plans are required to provide, for example for prescription drug benefits, are driving up the costs of the plans.

A hearing on the insurers’ lawsuit was expected to be held April 8. The insurers have asked the court to review the case on an expedited timeframe and hope it will be resolved by this summer.

Butler, Brandon. “Health Insurance Brokers: 'It's Complete Chaos'”. Worcester Business Journal. April 12, 2010. Available online as of 2010-04-12. Emphasis added.

Suffolk Superior Court Judge Stephen E. Neel today denied a request by six health insurers to allow them to implement double-digit premium rate increases for tens of thousands of small businesses and individuals.

Neel's decision not to grant an injunction sought by the insurers means the state Division of Insurance's rejection of 235 proposed rate hikes stands for now. However, the insurers' suit against Insurance Commissioner Joseph G. Murphy will go forward.

In making his much anticipated ruling, Neel accepted the argument of state government that the insurers should appeal Murphy's decision within the insurance division before they turn to the courts.

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The legal battle was touched off by the insurance division's recent decision to deny most proposed rate increases submitted by insurers for health plans covering individuals and small businesses.

In taking that action, the division was making good on a promise by Governor Deval Patrick to reject health insurance rate increases deemed excessive.

In response to the rejections, a half-dozen health insurers filed a lawsuit against the state seeking to reverse the decision by the insurance commissioner to block double-digit premium increases - a ruling they say could leave them with hundreds of millions in losses this year.

Filing the suit were Blue Cross and Blue Shield of Massachusetts, the state's largest health insurer, and the five commercial members of the Massachusetts Association of Health Plans: Harvard Pilgrim Health Care, Tufts Health Plan, Fallon Community Health Plan, Health New England, and Neighborhood Health Plan. All are nonprofit carriers.

Weisman, Robert. “Judge Denies Insurer's Request for Injunction”. Boston Globe. April 12, 2010, 3:43 PM ET. Available online as of 2010-04-12.

THE ASSOCIATED Press story on “4 million may face fine under health law” (Page A8, April 23) regarding the coming national health insurance mandate states that Democrats in Washington who support the mandate “point out that getting young, healthy Americans in the insurance pool will reduce costs for others.”

As someone who was on the staff of the Commonwealth Health Insurance Connector Authority from 2006 to 2010, I know this statement is not supported by the evidence here in Massachusetts, where an individual mandate has been in effect since 2007. Despite impressive gains in insurance coverage across all segments of the population, including the young and healthy, we continue to experience extraordinary annual increases in health premiums.

It’s concerning that national reform supporters in Washington are employing a talking point that the Massachusetts experience — on which national reform is closely modeled — so soundly refutes.

There are many good things to be said about Massachusetts’ pioneering health reform effort as it enters its fifth year of implementation, but it has not contained premium costs. The Legislature should step up and fine-tune it accordingly.

Dahlberg, Eric. “Contain costs of health premiums”. Boston Globe (op-ed). April 26, 2010. Available online as of 2010-04-26.