Iselin of Blue Cross raises red flag on rising health care costs

Sarah Iselin, the president and CEO of the state’s largest health insurer, says the rising cost of health care may be another reason why Massachusetts is in danger of losing its competitive edge.

Iselin, who returned to nonprofit Blue Cross Blue Shield of Massachusetts in January after a decade working elsewhere, noticed a change. She said 15 percent of the state’s residents had high-deductible health plans when she left; now, 43 percent do.

On The Codcast with John McDonough of Harvard’s T.H. Chan School of Public Health and Paul Hattis of the Lown Institute, she rattled off several other indicators suggesting the heavy cost burden on Massachusetts residents.

“We’ve always been a high-cost health care state,” she said. “But that is really starting to feel different to me. I think we’re moving into a period of growing tension between what our employers and families can afford on the one hand – I mean, that’s real – and the cost pressures and challenges that are facing our providers on the other. It’s our role as a health plan to strike the right balance. But I do think this is a particularly more challenging time that we’re heading into.”

She said the stakes are high, and called on all members of the industry to work together to address the problem. “If we want to continue to compete as a state, we have to nail this,” she said.

Noting that “there are limits to what the private market can do on its own,” Iselin said state government must play a role. She specifically supported giving the Health Policy Commission more power to hold businesses accountable for failing to meet the state’s cost-control benchmark.

Iselin said health insurance plans are already held accountable through minimum loss ratios, which require insurers to spend a minimum percentage of their premium dollars on medical claims and limit how much can go for administrative costs and fees. Failure to meet the minimum loss ratios can trigger rebates to customers. She said a similar level of accountability should apply to other players in health care.

The Blue Cross executive also raised concerns about the rise of national, for-profit health insurers. She said the companies often sidestep state-level regulations, tend to get less involved in state issues because of their national focus (“they just aren’t at the table in the same way as the local players”), and use profits from their other subsidiaries (most own pharmacy benefit managers) to grow their health insurance businesses.

“I don’t want to say that they’re predatory pricing. I don’t want to go that far,” she said. “But I do think it’s reasonable to really be asking ourselves is the way they price in any given market reflective of their underlying costs in that market. That’s something we have to be mindful of and watch.”

Iselin assured McDonough and Hattis that Blue Cross Blue Shield of Massachusetts will not abandon its nonprofit status. “Not on my watch,” she said. “We are committed to remaining not for profit. … It’s important to me personally.”