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Health insurance premiums poised for quick rise

Insurers say more are seeking care

WALTHAM - Don't get used to those moderating health insurance premium increases.

Even as Massachusetts business and government leaders celebrate the most modest premium rate hikes in years for small employers and individuals, speakers at a health insurance seminar here yesterday warned that the main trend restraining bigger increases - fewer people seeking health care in the past year - already may be changing.

"We definitely are starting to see some uptick,'' said Martha R. Temple, president of the New England market for insurance giant Aetna Inc. "The economy is turning up. And we think we may see, sometime in 2012 and 2013, the utilization tick up to historic levels.'' That could mean a return to the double-digit annual increases of the past decade.


Massachusetts insurers have been able to limit base rate premium increases - they average 1.8 percent for the period starting April 1 in the so-called small-group market - in part because the weak economy caused many people who lost jobs or were afraid of losing them to delay elective procedures, speakers at the conference said. But as the economy strengthens, they expect more people will return to doctors and hospitals, driving up spending on medical care.

"We are susceptible as an industry and a society to the ups and downs of the economy,'' said Andreana Shanley, senior vice president and chief actuary of Blue Cross Blue Shield of Massachusetts, the state's largest health insurer.

Most health plans represented at yesterday's program at Waltham Woods Conference Center, sponsored by the New England Employee Benefits Council, estimated that their "cost trend'' increase - a combination of overall medical claims and the price of doctors visits, tests, and procedures - declined to between 6 and 8 percent during the past year but is likely to return to between 8 and 10 percent this year and next.


Insurers said they were able to limit base rate premium hikes partly because they had planned for higher health care use and also because they were starting from a larger premium base after years of hefty increases. Many employers pay more than the base rate because of additional factors such as their location or the age of their workforce.

Some executives said they hope premium increases could remain moderate even if underlying health costs rebound, citing changes in plan designs that boost copays and deductibles, narrow networks of physicians available to members, or ask members to pay more for care from higher-priced providers. "We want to see this industry moving toward the members having more skin in the game,'' said Eric Swain, vice president of sales and account management for insurer UnitedHealthcare of New England.

Health insurers are also shifting doctors groups and hospitals to so-called global payment systems, under which they are given fixed budgets for patient care rather than being paid fees for each visit, scan, or surgery. Recent contracts reached with powerful providers, such as Partners HealthCare System - corporate parent of Massachusetts General and Brigham and Women's hospitals - include risk-based payments and modest rate increases.

"For us, probably the biggest surprise we've had is in renegotiating the contracts,'' said Robert J. Jordan, chief actuary of Neighborhood Health Plan in Boston. He said hospitals and doctors worked with insurers during contract talks to better coordinate care and improve quality.


But containing medical spending will remain a challenge because of "cost drivers'' ranging from the higher prices for mental health services to expensive new drugs for diseases such as multiple sclerosis, arthritis, and hepatitis C, said Janis Liepins, vice president of Fallon Community Health Plan in Worcester. While those treatments boost payments for insurers in the short term, Liepins said, they could save the health care system money in the long run by keeping patients out of the hospital.

Insurers, however, were cautious about the short-term outlook. "Even though the [premiums] are moderating, the underlying costs continue to rise,'' said Derek Abruzzese, vice president of strategy and product development for Tufts Health Plan in Watertown. "And we expect them to rise at a level higher than inflation.''

Shanley, of Blue Cross, said she was optimistic costs eventually can be brought under control if insurers and providers together tackle what she said was substantial waste in the system. "The problem is we're trying to address [health care] access, quality, and cost all at the same time,'' she said. "That's an awful lot of variables to juggle without upsetting the apple cart.''

Robert Weisman can be reached at weisman@globe.com.