HEALTH INSURANCE PREMIUMS for Massachusetts residents will rise by an average of 7.9 percent at the beginning of next year, despite insurers having profited from declining health care costs during the COVID-19 pandemic.
Kevin Beagan, deputy commissioner for the health market at the state Division of Insurance, said the higher premiums reflect several factors, including uncertainty about what health care will look like next year. “Every company highlighted the uncertainty associated with 2021,” Beagan said during a presentation before the Health Policy Commission on Tuesday.
The biggest increase will be for the lower-cost offerings of Tufts Health Plan on the Massachusetts Health Connector. Beagan said the Division of Insurance is “definitely not happy with” Tufts’ 12.2 percent planned increase. But the division chose not to challenge the increase and conduct a hearing process because that would have prevented the plans from being available in time for October’s open enrollment period on the Health Connector.
Among the other largest health plans in the state, a Boston Medical Center plan that is also available to low-income patients on the Health Connector will see an average 2.5 percent premium increase. Blue Cross Blue Shield’s HMO Blue plan, a commercial plan that covers 80,000 members, will see a 5.4 percent premium increase. Always Health Partners and United Healthcare both are planning increases of at least 9 percent, while members with different Tufts health plans will see increases of at least 7 percent. Harvard Pilgrim’s HMO plan members will see a 5.5 percent increase on average.
The increases may surprise consumers, since health care spending is down and insurers have generally reported profits. The shuttering of doctors’ offices to non-essential procedures led to a sharp decline in health care spending this year, despite the need to treat COVID-19 cases. The Division of Insurance reported that payments made by insurers to cover health care procedures were 35 to 50 percent below normal in April and May for typical hospital and doctor visits, and that drop was only partially made up by COVID-19-related spending and telehealth visits.
Beagan was not able to provide a bottom line for how much insurers profited during the pandemic, but he said total health care spending in 2020 will probably be 5 percent lower than in 2019.
Two health insurers – Blue Cross Blue Shield and Harvard Pilgrim – are refunding money to consumers this year because they spent less of their premium money on claims than is required by law. Other carriers may be forced to refund money to consumers a year from now, under state and federal laws governing what percentage of premiums must be used to cover health care expenses. Calculating those rebates will only be done in late 2021.
Beagan said several factors are influencing insurance companies’ projections of future costs, particularly the fact that health care expenditures are picking up. The Division of Insurance projects that payments for the rest of 2020 will be around 10 percent higher than normal, due to catch-up demand from postponed surgeries, increased severity of illnesses from people who delayed care, the need to cover more COVID-19 testing and potentially a vaccine, and doctors seeking higher reimbursement rates to cover losses and take COVID-related precautions like buying personal protective equipment.
Looking to 2021, Beagan said, doctors are expected to negotiate higher reimbursement rates to cover increased use of technology and COVID-related precautions. Use of the health care system is expected to eventually return to normal levels, and no one knows if another COVID-19 surge will increase costs. There will likely be costs for new COVID-19 drugs, more testing, and eventually a vaccine. Insurers are also expecting higher behavioral health costs, particularly for children and adolescents. It is also difficult to predict the impact of telehealth, which has grown in popularity during the pandemic. The Legislature is considering establishing a framework for paying for telehealthgoing forward, but lawmakers have not yet agreed on a bill.
Gov. Charlie Baker, a former health insurance executive, has recently taken a different stance, saying he thinks health care costs are remaining low. Last week, in talking about the many variables that make it difficult to craft a budget for the current fiscal year, Baker said one wildcard on the positive side of the ledger has been health care costs. He said the incidence of such routine health issues as ear infections, sore throats, and strep are way down from previous years.
Baker said the wearing of masks and social distancing are having an impact beyond COVID. “Health care expenses, which the Commonwealth has a ton of, are coming in way below projections,” he said.
The Division of Insurance has also been tracking whether individuals lost health insurance coverage during the pandemic, which state officials feared would happen due to the enormous number of job losses and furloughs. Beagan said the department instructed insurance carriers to work with employers and try to offer benefits like grace periods and gradual payment plans to ensure individuals can maintain their health insurance. So far, comparing July 2020 to April 2020, there are 40,500 fewer people covered under commercial insurance plans, but 30,000 of them appear to have shifted to government-run plans, generally Medicaid. Those numbers are out of an insured population of 6.3 million.
“There was much less disruption in membership than we’d worried about,” Beagan said.