Lawyers for health insurers and the state sparred in court yesterday over regulators’ rejection of 235 proposed rate increases, and a judge said he would decide by Monday whether the companies will be allowed to charge the higher prices.
Suffolk Superior Court Judge Stephen E. Neel’s promise of a quick decision followed a two-hour hearing on the case, which has focused public debate on the impact of rising health care expenses and the role of government in controlling costs. The rates affect individuals and small businesses.
The attorney for the insurers called the state’s rejection of rate increases last week “arbitrary and capricious.’’
Insurance Commissioner Joseph G. Murphy exceeded the state’s authority when he denied 235 of 274 proposed premium increases, argued Dean Richlin, a partner at Boston law firm Foley Hoag who is representing six Massachusetts insurers.
Insurers are now faced with having to agree to unfair rates or “go out of business,’’ Richlin told the judge and a standing-room-only crowd of about 70 insurance industry representatives, government officials, and others. Onlookers spilled out the door of the courtroom, as the insurers’ lawyer argued for a preliminary injunction that would clear the way for the companies to begin charging higher rates.
David A. Guberman, a state assistant attorney general, countered that the insurance commissioner was within his authority to approve or deny rate increases. He said the court had no jurisdiction in the case because insurers have not exhausted the appeals process within the state Division of Insurance.
“The complaint is based on a profound misunderstanding of what the commissioner has done,’’ said Guberman, who contended insurers had no right to presume their rate proposals would automatically be approved. They should have been prepared to continue pricing policies using existing base rates until the state acted on the requested increases, he said, adding: “Whatever is the most recent rate is what’s legally in effect today.’’
The rejected rates were to have taken effect April 1. Proposed base rate increases averaged 8 to 32 percent for individuals and businesses with 50 or fewer employees in the small-group market. The category includes more than 800,000 residents served by hundreds of insurance plans. About 50,000 policies covering 200,000 members — roughly a quarter of the small-group market — were up for renewal April 1.
In the past, health insurers usually notified regulators of rate increases on the day they took effect. But in February, Governor Deval Patrick put in place emergency regulations requiring insurers to submit proposed rates 30 days in advance. Patrick said the state wanted to link the increases to the medical consumer price index — a spending measure rising at an estimated annual rate of 4.8 percent — to cushion the impact on small businesses and families struggling in the weak economy.
Insurers have said they would lose money if forced to sell policies with prices based on the index. In court yesterday, Richlin called it “a meaningless standard’’ that had no actuarial value in predicting the future cost of medical care.
Late last month, Kevin Beagan, the assistant insurance commissioner, phoned each Massachusetts health insurer to warn them that the Insurance Division would not accept increases exceeding 7.7 percent. The insurers concluded they could not profitably offer policies at that rate, though some out-of-state insurance carriers did submit 7.7 percent increase proposals that were approved.
The state-based insurers contesting the rate rejections are Blue Cross and Blue Shield of Massachusetts, Harvard Pilgrim Health Care, Tufts Health Plan, Fallon Community Health Plan, Health New England, and Neighborhood Health Plan.
Their lawyer, Richlin, challenged both the rate-increase denial and a directive from Beagan on Tuesday that required insurers to recalculate their offerings using last year’s base rates and market them on the state’s Health Connector website, as well as through the companies’ networks of independent brokers.
The insurers posted their anticipated rate increases last month. After the rate increases were rejected, Murphy ordered the companies to remove the higher rates from Connector site, www.mahealthconnector.org.
If insurers have to sell policies at 2009 base rates, the industry could lose more than $100 million over the next eight months, Richlin said, even if insurers tack on allowable increases for factors such as the size and age of a company’s workforce. Losses could be even steeper, he said, if businesses that renewed their policies at higher rates earlier this year scrap them to buy new policies at state-ordered lower rates. That could potentially push one or two insurers into state receivership, he said.
“There’s no question that the 2009 rates are completely inadequate and completely arbitrary,’’ Richlin said.
Guberman, however, said the proper first avenue for appeal is to go through administrative hearings at the Insurance Division. He said regulators are committed to an “expedited hearing process,’’ with hearing officers ready to issue their findings by early June.
He noted that one insurer, Harvard Pilgrim, already has filed an administrative appeal. Harvard Pilgrim spokeswoman Sharon Torgerson confirmed that the company filed its appeal last Friday.
“Plaintiffs haven’t even begun to show that the administrative process would be futile,’’ Guberman said.
It certainly was a pure political stunt for Gov. Patrick to limit the increases to the medical inflation rate of 4.8%. The MI rate has little to do with what the premium increases need to be for the insurers not to lose money on these blocks of business.
The bigger question of course is this a foreshadowing of what will happen nationally once exchanges are set up nationally in every state? While Massachusetts is to be commended for lowering its rate of uninsured residents to the lowest in the country, the increasing costs of coverage that are subsidized for income eligible residents has put a larger than expected hole in the state's budget. The state has only begun to address the increasing cost issue by asking insurers and providers to work together to develop bundled rates of payment. This effort has not gone very smoothly as I have noted in a previous post and will take several years at best to lower costs.
No comments:
Post a Comment