BOSTON — Massachusetts has the second highest family health insurance premiums in the country, according to the Health Policy Commission, and the state Insurance Division is investigating medical inflation as average premium rates on individual and small group markets grew 7.9% over the same period. course of 2024.
Health plans and hospitals were at odds over what drives up medical costs – often pointing at each other – at an Insurance Division hearing last week, and at odds over the issue whether administrative costs are a primary inflationary factor in Massachusetts.
The division will hold hearings throughout the winter to try to shed light on rising premiums that are burning holes in consumers’ pockets. The rise to 7.9% in the merged market follows last year’s 3.2% increase.
This weighted average increase includes a weighted increase in medical costs of 6.6%, pharmaceutical costs of 11.8% and administrative costs of 0.6%. There are 648,253 consumers in the merged market, including qualified health plans for individuals and small employers, in Massachusetts, according to the DOI.
To help reduce costs, the division plans to present a series of recommendations in February based on information gleaned from the hearings, DOI Deputy Commissioner Kevin Beagan said.
Last week’s hearing focused on administrative expenses, an area that all panelists agreed is highly regulated in Massachusetts. The DOI regulates the merged market, so no more than 12% of an insurer’s costs can be spent on administration. At least 88% of premiums are supposed to be spent on health services.
Darren Bennett, chief financial officer of Boston Medical Center Health Plan, and Lucy Silva, chief financial officer of Massachusetts General Brigham Health Plan, both said administrative costs have increased recently due to efforts to improve the consumer experience, such as have a mobile app, call center or online supplier listings.
“Moving into the digital age, which we’re really in right now, the focus now is on having adequate access,” Silva said. “Even the ID card has become largely digital, and that is the preference of many of our members. And I would say that as a consumer, I lean in that direction as well and I expect that all the information that I need for covered services and where to get services is very easily accessible and mobile.
Bennett said there may be an opportunity to reduce administrative costs by adopting artificial intelligence and automation to streamline operations in certain areas.
“The key thing I’m hearing is that the expenses you’ve described are part of the nature of running a health plan, and the expenses you’re reporting are ones that continue to evolve over time. you’re trying to find new ways to make things more efficient, but you’re still constrained to making sure it stays within 12 percent,” Beagan said.
Bennett and Silva agreed, instead pointing to hospitalization and prescription costs that drive up premiums.
Some health care provider panelists, however, highlighted plans to increase health care costs.
“Hospitals and providers contract with many, many different health plans. Each of these plans has many products. Each of these plans delegates many services to contracted providers like [pharmacy benefit managers]like radiology management, like behavioral health. For each of these situations, the hospital or doctor’s office must deal with many different rules, regulations, requirements, determinations of medical necessity, what prior authorization is when it is required, when it is not. is not. All this leads to enormous costs for the supplier. None of that is mentioned in the conversation we just had,” said Karen Granoff, senior director of managed care policy for the Massachusetts Health and Hospital Administration.
Dr. Barbara Spivak, an associate internist at Beth Israel Lahey Health and past president of the Massachusetts Medical Society, said hospitals can be overwhelmed because of administrative issues with health plans.
Spivak said she recently had a patient who took three weeks to get prior approval for a drug she recommended because the approval was denied the first time and her patient had to appeal. In the meantime, her patient ended up in the emergency room, she said.
“I think administrative waste due to delays in care, related to access delays and prior authorizations, are things that we should be able to address at a system level through statewide policies. It doesn’t take a genius. We all know what it is and there are ways to fix it,” she said.
