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State approves new health insurance base rates

Impact on premiums will vary widely

State insurance regulators Friday issued new health insurance base rates for small employers and individuals renewing policies in the fourth quarter, and the first quarter of next year. But the rates shed little light on what employers and individuals will actually pay.

The base insurance rates will rise by an average of 2.1 percent for those customers who renew between Oct. 1 and the end of the year, and an average of 1.8 percent for those renewing after Jan. 1. Those are among the smallest increases in base rates in memory for the so-called small group market, which covers about 700,000 Massachusetts residents who are employees of small organizations or sole proprietors.

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But the ultimate prices that individuals, businesses, and other customers in that market will pay will depend on a number of “rating factors,” ranging from workforce age to geographic area, that get tacked onto the base increase.

Beginning in January, however, a new set of factors imposed by the federal health care law will be added to the mix, resulting in a complicated hybrid formula that is expected to produce wide variations in premiums.

An analysis published last month by Wakely Consulting Group projects the new factors stemming from President Obama’s health care law would add an average of 3.7 percent to the base rate increase. Combined, the cost of insurance in the small group market could threaten the state’s benchmark goal for reining in health costs. The goal of a Massachusetts law enacted last year was to cap overall health care spending at 3.6 percent — the rate of economic growth projected in 2014.

The state’s limit applies to out-of-pocket expenses and costs for larger businesses and government-insured residents, in addition to small employers and individuals.

Wakely’s study also predicted that the impact of the national law on Bay State individuals, families, and businesses will vary widely: Some base rates could be as much as 20 percent below the averages, while others could be 26 percent above the averages.

For now, the small increases in base rates indicate “we continue to head in the right direction, though more work needs to be done” to contain health costs, said Barbara Anthony, the state undersecretary for consumer affairs and business regulation. Anthony said she remains optimistic that Massachusetts can meet its 3.6 percent guideline for health spending increases.

Lora Pellegrini, president of the Massachusetts Association of Health Plans, an insurance trade group, said insurers are working to negotiate contracts with hospitals and doctors to reduce costs.

“These rates are part of the picture,” she said. “You have to apply the rating factors on top of this, and the Wakely report showed there will be wide variations in what people will pay.”

Robert Weisman can be reached at weisman@globe.com. Follow him on Twitter @GlobeRobW.
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