BOSTON — Business leaders are pushing back against proposed health plan rate hikes being sought by commercial insurers next year, calling on regulators to reject the higher costs they say will hurt the state’s small employers.
The state Division of Insurance is reviewing proposals from large commercial insurers to increase premium rates by an average of 8.4% next year for merged group health plans offered to businesses with 50 or fewer employees.
The insurance rate hikes, if approved by regulators, would far exceed the 3.6% benchmark for health care costs set by the Massachusetts Health Policy Commission, an agency that tracks health care spending.
But business leaders say the higher rates would add to mounting financial pressure on private employers that already includes rising labor and energy costs, as well as a paid family and sick leave law.
Jon Hurst, president of the Retailers Association of Massachusetts, called on state regulators to reject the proposed rate increases or demand that health care providers detail their costs to “justify the increases.”
“Small businesses aren’t seeing an increase in sales anywhere near 3.6%, let alone 8.4%. and their employees aren’t seeing income increases at that percent,” he said in testimony on Tuesday. “We’re at a tipping point where you’re going to see more dark store fronts unless we do something to rein in these costs.”
Hurst said the merger of the individual and group health insurance markets is “flawed” and puts small business owners at a competitive disadvantage to larger employers when it comes to health coverage. He said the number of small employers in the merged market has dropped by 60% in recent years.
Chris Carlozzi, Massachusetts state director of the National Federation of Independent Businesses, echoed those sentiments and also called on regulators to reject the increases. He said the rising cost of health care coverage is preventing many small businesses from finding much-needed workers.
“Right now, one of the largest challenges is the inability to find help,” he said. “They’re trying to compete, with larger organizations as well as the private sector, that sometimes have more robust benefits packages. They’re at a disadvantage when it comes to offering affordable health plans.”
Insurers pointed to hospital and prescription drug costs — specifically the booming demand for new weight-loss and diabetes drugs — which they say are driving much of the rise in medical expenses for many employers.
Blue Cross Blue Shield of Massachusetts is projecting a 6.7% increase for 47 premium plans in the individual and small group market for 2025, impacting about 180,000 individual and group members who renew their coverage for next year. The insurer is projecting pharmacy benefits costs to rise by 10.9% next year.
“Hospital and pharmaceutical costs continue to be the two largest categories of medical spending increases across Massachusetts,” Andrew Lafortune, an actuary for Blue Cross Blue Shield of Massachusetts, said in testimony at Tuesday’s hearing. “More than half of the total medical expense trend is driven by increases in provider reimbursem*nts. The effects of inflation and labor shortages continue to lead to large price increase requests from health care providers.”
“We want to keep providers in our network, but it’s getting more and more challenging,” he added.
He said the proposed rate increases are also impacted by a state law requiring health plans to spend at least 88% of premium on direct member care.
The Massachusetts Association of Health Plans, which represents many commercial insurers, attributed the proposed rate increases to the “demands for double digit reimbursem*nt rate increases by hospitals” and “providers emboldened to ignore the cost growth benchmark and continued outsized increases in prescription drug prices driven by a complete dearth of transparency and accountability for pharmaceutical manufacturers.”
“Pharmaceutical prices and the costs of inpatient, outpatient, and physician services continue to be the largest drivers of increased health care spending, with more than 64% of total medical expense trend driven by pharmaceutical costs and utilization, Lori Pellegrini, the association’s CEO, said in a statement.
She pointed out that projected costs for medical and pharmacy account for 91% of plans’ proposed premium increases.
Pellegrini said a proposal in the state Legislature to set a minimum statutory reimbursem*nt rate for hospitals without a cap on the maximum amount of payment “will only result in further upward pressure on premium rates.”
“Health insurance premiums are reflective of the cost of care — we must address the key drivers of health care spending in a meaningful way to make health care more affordable for employers and consumers,” she said.
Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group’s newspapers and websites. Email him at cwade@cnhinews.com
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