Average health insurance base rates will increase by 2.9 percent for small employers and individuals whose policies renew in the third quarter, according to data released Friday by the state Division of Insurance.
The rate hikes, while higher than the 1.9 percent increases of a year ago, were not as big as expected in what is the first filing period since health insurers began being affected by a new tax to help finance the federal health care overhaul. That tax is projected to cost Massachusetts health insurers $213 million this year.
The tax resulted in steep first-quarter losses for the largest insurers, but the relatively modest base rate increases reflectsconfidence they can absorb the added costs and their determination to retain customers, said Barbara Anthony, state undersecretary for consumer affairs and business regulation.
“We are the beneficiaries of some transformation that’s going on in the marketplace,” Anthony said, citing new health insurance contracts that give doctors and hospitals fixed budgets for patient care. “They’re calculating rates that will allow them to be competitive.”
The so-called small group market affected by the rates covers about 147,000 people, including sole proprietors and employees of small businesses and other organizations. The period between July and September is one of the most active for health insurance policy renewals.
Third-quarter base rates are scheduled to edge up 1.9 percent for health maintenance organization members of Blue Cross Blue Shield of Massachusetts, the state’s largest health insurer, but decline 15 percent for members of its preferred provider organizations, according to the state. Blue Cross could afford to drop its rates for PPO members partly because it will receive cash from other insurers under a “risk adjustment” provision of the federal Affordable Care Act that seeks to more evenly spread insurance risk.
Among other large Boston area insurers, Harvard Pilgrim Health Care rates will climb 4.9 percent for HMO members and 4.3 percent for PPO members. Rates at Tufts Health Plan will increase 4.9 percent for HMO members and 4.8 percent for PPO members.
While they are an indicator of the general trend in health insurance rates, base rates are only one factor in what companies or individuals actually pay. Rates for most employers also include additional factors ranging from the type of industry to the age of employees.
Health care consultant Jon Kingsdale, managing director of Wakely Consulting in Boston, said some insurers may be holding down rate increases in an effort to steal market share from competitors at a time of flux in the industry.
“This is a period of considerable uncertainty in pricing,” Kingsdale said. “The rates suggest they’re more afraid of losing business right now — or interested in gaining business — than they are concerned about making a healthy profit.”