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The Boston Globe

Business

Insurance rates will increase for small businesses

Health insurance rates will rise at a faster clip over the next several months as insurers spend more to implement the federal health care law and patients increase the use of high-cost drugs and medical services, insurers and regulators said Monday.

The state Division of Insurance has approved rates that allow small-business health premiums to rise, on average, 3.5 percent in the fourth quarter of this year, compared to the same three-month period in 2013.

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Last year, the increase was 2.1 percent.

For the first quarter of 2015, the division approved an increase of 3.1 percent. That was up from a 1.9 percent a year earlier.

“The plans are going to be very aggressive to keep costs affordable, but the premiums that you’re seeing reflect the cost of medical care,” said Eric Linzer, senior vice president at the Massachusetts Association of Health Plans.

These rates apply to about 18 percent of the Massachusetts commercial insurance market that includes individuals and small businesses. Large and mid-size companies account for the rest of the market.

Insurers say new taxes and administrative costs associated with the federal Affordable Care Act, or Obamacare, are driving up costs, along with high usage of the new blockbuster drug Sovaldi, which cures Hepatitis C at a cost of $84,000 for a full treatment.

These costs contributed to operating losses at the state’s biggest health insurers, the Globe reported last week.

“As costs continue to rise . . . it’s going to be a challenge to make sure premiums are affordable,” Linzer said.

The rates approved for the first quarter of 2015 will apply for the full year to individuals who buy insurance, including those who purchase through the state’s Health Connector website. Although the average increase is 3.1 percent, many rates will rise higher. For example, rates will increase 4.9 percent at Boston Medical Center’s HealthNet Plan and at Worcester-based Fallon Health, and 4.8 percent at Health New England of Springfield.

Since the passage of a 2012 health care cost-containment law, regulators have been working to limit health care spending increases to 3.6 percent per year. The rates approved Friday are within that target.

“We think that’s good that the industry is really paying attention to the benchmark, notwithstanding some of these unanticipated expenses,” said Barbara Anthony, the state’s undersecretary of consumer affairs and business regulation. “We’re still below the benchmark.”

Priyanka Dayal McCluskey can be reached at priyanka.mccluskey@globe.com. Follow her on Twitter @priyanka_dayal.
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