Consumers and businesses across Massachusetts will have to pay more for health care in 2016, as insurance rates rise at a faster clip and some premiums soar by double digit rates.
At Blue Cross Blue Shield of Massachusetts, the state’s biggest commercial insurer, premiums will rise an average of 5 percent this year. Rates are set to increase between 3 and 7 percent at Tufts Health Plan, 6 to 12 percent at Harvard Pilgrim Health Care, and 9.5 percent on average at Fallon Health.
The jumps in premiums come as insurers pass on the costs of rising drug prices, insurers and analysts said, and grapple with the cost of expanding coverage under the Affordable Care Act. Most of the state’s major health insurers are sharply raising premiums for individuals, small firms, and big businesses, according to a Globe review of figures provided by the insurers and the state Division of Insurance.
For many, the upward trend is troubling.
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“People cannot sustain the amount of money they’re paying for health care, ” said Joshua Archambault, senior fellow at the Pioneer Institute, a right-leaning Boston think tank. “At some point, people really can’t afford it.”
The Division of Insurance will hold a two-day public hearing on the issue. Insurers will be called to discuss their rates at the first-of-its-kind hearing on Jan. 11, and members of the public can comment on Jan. 12.
“In the interest of transparency, we’re holding these [hearings] so insurers can explain the rates they say they need,” said Chris Goetcheus, a spokesman for the division.
The rise in health care costs for insurers — and subsequently consumers — comes after prices moderated in recent years. With the enactment of the Affordable Care Act, more people have coverage, and as a result they are using more medical services and prescription drugs, analysts said. In addition, they said, insurers may be passing along the costs of millions of dollars in taxes and fees to finance the expansion of health coverage.
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Not all spending growth is surprising or troubling, said Michael E. Chernew, a professor of health care policy at Harvard Medical School.
Some spending growth is expected, given that locally and nationally, more people have gained insurance, he said. But other trends are concerning, he said, such as the move by many drug companies to put high price tags not just on innovative medicines but on long-established drugs as well. The prices of some common generic drugs have surged 15, 25, and even 75 times what they were just two years ago.
“Some of the increased spending is good,” Chernew said, “and some of the increased spending is bad.”
Several insurers and the state Division of Insurance, which approves rates for individual and small-business plans, attribute rising premiums in part to a controversial element of the federal health care law. That program, called risk adjustment, requires insurers with healthier members to make payments to companies with sicker members in order to share the risks and cost of insuring people with a lot of medical needs. It is designed to prevent insurers from boosting profits by enrolling only healthy members.
When the program went into effect in 2015, most insurers ended up paying money to their largest competitor, Blue Cross, which received more than $51 million in risk adjustment payments. Tufts Health Plan received more than $8 million.
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The program aims to smooth and stabilize insurance rates, but some insurers say it is having the opposite effect. Companies, including Harvard Pilgrim, which made about $4 million in payments, Fallon, which paid about $11 million, and Neighborhood Health Plan, which paid about $28 million, said they raised rates more in 2016 because of risk-adjustment.
One portion of the market, health plans for individuals and small businesses, shows the steepness of some increases. Harvard Pilgrim raised premiums 8.7 percent for these plans in 2016, compared with a 1.4 percent decline in rates in 2015. Fallon’s rates are up 16.5 percent, compared with a 4.9 percent increase a year earlier. At Neighborhood Health, premiums rose 9.4 percent in 2016, compared to 5.9 percent a year earlier.
The national insurer United HealthCare raised rates 13 percent in 2016, after raising them 4.5 percent a year earlier.
Blue Cross, on the other hand, said the payments it received to help cover its higher population of sicker members helped it keep its premium increases modest: rates for individuals, small businesses, and large businesses are up about 5 percent this year, compared with 4.2 percent in 2015.
Even while increasing their rates, insurers said they are taking steps to rein in rising premiums.
At Tufts Health Plan, premiums for individual and small businesses plans are rising 6.8 percent in 2016, compared to 4.5 percent in 2015. But Tufts said it has redesigned some plans so members can keep premium increases to about 1 percent by opting to pay higher co-payments and deductibles for medical services.
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“We’re developing new programs to try to control the costs customers are experiencing,” said Marc Spooner, Tufts’ president of commercial products. “We take our responsibility to control costs very seriously.”
Priyanka Dayal McCluskey can be reached at priyanka.mccluskey@globe.com. Follow her on Twitter @priyanka_dayal.
A clarification was made to this story Monday to reflect the average premium increase at Fallon Health.