State health plan deficit could hit $190m

Copayment increase under consideration


STATE EMPLOYEES IN Massachusetts could see increases in their health insurance co-payments and deductibles under one option being considered by a state commission grappling with a growing deficit in state and municipal employee health insurance budgets.

Dolores Mitchell, executive director of the Group Insurance Commission, said Wednesday that the amount of money allocated in the $36.5 billion state budget to pay for employee health insurance was $120 million less than what is needed to cover enrollment and premium costs. Offering an updated range of the potential budget gap, Mitchell said the problem could now grow to between $165 million and $190 million.

Gov. Charlie Baker took office last week and estimated the state’s overall midyear budget gap at more than $500 million, and administration officials are still studying the budget to come up with a more specific estimate as well as a plan to bring it into balance.

Health care spending has escalated in the past few months, Mitchell said, and GIC officials are concerned it will continue to climb. The projected deficit is expected to carry over into the next fiscal year, which starts July 1. The commission was allocated $1.8 billion in the current state budget, covering fiscal 2015.

GIC commissioners are contemplating five options to close the budget gap. The options range from upping employee co-pays and deductibles – estimated to save $10 million to $70 million – to changing the way the GIC prices plans to incentivize employees to choose less costly plans.

“I doubt it would be all one. We might end up recommending some from one option, some from another,” Mitchell told the News Service after the five proposals were presented during a meeting Wednesday.

GIC commissioners said it would be undesirable to shift increased costs to the 420,000 people covered by the state health plan, but they also pointed out workers’ premium increases have been low for the past four years without any changes to their benefits. In March, the GIC voted for an overall 1 percent premium increase in its plans for fiscal 2015.

The budget deficit grew partly because two plans claim costs are running higher than their premiums, according to members of the commission.

Although it was not one of the options discussed, Mitchell said the GIC could opt to freeze enrollment in one or more of the health plans that “can’t seem to get their costs under control.”

“We have done it before,” she said. “It is amazing how it works.”

Mitchell said annual state budget funding for the GIC has not caught up with the number of new members, with employees being added from the MBTA, and a 2011 state law that eased the way for municipalities to join the state health plan. Mitchell also said a federal fund used to pay claims has dried up.

“Although the Legislature has always come through at the last minute and paid the claims that need to be paid, we have a structural problem . . . ,” Mitchell told the News Service. “So we are starting from a base that is not realistic.”

In fiscal year 2014, the Legislature provided the GIC with an additional $66 million beyond its initial appropriation.

Another option under consideration does not change workers’ benefits and accepts higher premium requests from health care providers. This scenario increases costs to the state and there is no incentive for health providers to lower costs, according to GIC members.

Melrose Mayor Robert Dolan, a member of the commission, said there is a lot of fear among municipal officials around a potential rate increase. Town managers say anything more than 6 percent will result in job losses, Dolan said. “There are a lot of jobs at stake right now,” he said.

He added it is also unreasonable to expect there will be no cost increases for employees.

Another proposal converts Harvard Pilgrim Health Care and Tufts Health Plan preferred provider organization (PPO) plans to point of service plans (POS,) which means people have a primary care physician and they work with their doctor to coordinate all their care, Mitchell said.

Under this scenario, projected to save $22 million, there would be “a little more coordination, a little more of a role for the primary care physician,” Mitchell said.

Mitchell said she is “intrigued” by another option, referred to as the “migration strategy” that would attempt to get people open to the idea of looking around to choose the health care plan that is the best bargain for them.

The migration strategy adjusts self-insured premiums to reflect actual plan performance, which would give an advantage to carriers with better provider contracts. The proposal aligns premiums with costs, creates more equitable pricing based on specific plans costs, and eventually shifts GIC spending over time into better-priced providers, according to GIC commissioners. This saves $12 million to $25 million.

Meet the Author
The commission will meet again on Jan. 30 to discuss preferred options.

“These are tough decisions, and that’s why we want to take our time about making any decisions, and giving the commissioners an overview and we’re gonna go through this same exercise on the 30th,” Mitchell said.