Thousands of people who buy subsidized health insurance will face substantial premium increases — an average of 21 percent — if they want to keep the only plan that gives them access to certain prestigious Boston hospitals.
That insurer, Neighborhood Health Plan, has raised its rates dramatically for customers of the Massachusetts Health Connector, the state agency that serves people who don’t get insurance from an employer.
Neighborhood Health, which covers one-fourth of Connector enrollees, is the only subsidized health plan whose provider network includes Partners HealthCare, owner of Massachusetts General Hospital and Brigham and Women’s Hospital.
The news came as a shock to the Connector’s governing board, which learned Thursday about the premiums for 2017, as well as a cutback in a state program that reduces premiums.
“This proposal is going to be massively disruptive for members, for the Connector, and for health plans,” Connector board member Nancy Turnbull said.
The Connector offers several other insurance plans with lower costs and similar benefits — but their networks of hospitals and doctors are different. People who switch plans to avoid the high premiums may have to find new physicians or other providers.
Connector officials said they would alert members to the importance of shopping for new coverage rather than automatically renewing their current plans, and said they are bracing for strains on customer service when open enrollment starts Nov. 1.
Those who do shop can find deals, however. Among the other subsidized plans, the premium increases are minimal, and one plan, BMC Healthnet, is lowering premiums by 8 percent. For a quarter of people enrolled in subsidized plans, premiums will go down or stay the same.
The Connector provides subsidies to reduce premiums for low- and moderate-income people. Depending on income, people enrolling in subsidized health plans can expect to pay up to $305 per month in 2017. In the current year, the highest monthly payment, after subsidies, was $226.
State Insurance Commissioner Daniel R. Judson outlined several reasons for the premium increases, including costs associated with the federal Affordable Care Act, an influx of newly insured patients with costly medical problems, and especially the “incredibly quickly rising price” of pharmaceuticals.
“It’s small consolation for the problem we’re wrestling with right now, but we have one of the healthiest health insurance marketplaces in the United States,” he said, noting that in other states insurers were dropping out of health insurance exchanges and even becoming insolvent. “We’re holding our own.”
In a statement, Neighborhood Health Plan said “rates are being driven up industrywide by increased medical costs and utilization as well as structural changes in the Affordable Care Act. We have worked aggressively to provide affordable premiums by keeping administrative expenses low, achieving medical cost savings, and recontracting with providers — and we continue to do so.”
Board member Rina Vertes raised the possibility that Neighborhood Health may have charged too little in 2016 and is now trying to compensate.
The Connector enrolls about 230,000 people, of whom nearly 180,000 receive subsidies. Those who buy unsubsidized insurance are also facing substantial premium increases — an average of 19 percent — with Neighborhood Health and Harvard Pilgrim Health Care showing the biggest spikes.
The surprisingly high premiums coincide with another difficulty. Because of budget constraints, the Connector is curtailing its longstanding practice of “smoothing” — using state and federal money to narrow the difference between the highest- and lowest-cost plans. In 2016, the state expects to spend about $20 million on smoothing. But in the first half of 2017, it plans to spend $2.1 million, lowering costs to a much lesser degree than in the past.
“That’s going to have a big impact on people,” said Suzanne Curry, senior health policy manager at the advocacy group Health Care for All. Previously, people with the lowest income could choose any plan and pay no premium, she said. Now, they face premiums for certain plans.
“There’s going to be a lot of shifting and a lot of disruption,” Curry said, adding that advocates worry that some people will drop insurance altogether if their preferred plan is too expensive.
At Thursday’s meeting, several Connector board members expressed dismay about the reduction in smoothing, which they had learned about only the night before.
“We have to look at the human impact of this,” board member Dimitry Petion said. “This is something that’s going to truly impact the population that we serve. . . . How many people are going to lose their provider?”
But another board member, Mark S. Gaunya, noted the financial realities facing the Connector. “The budget is the budget,” he said. “If we had three weeks to think about it, at the end of the day we’re limited by our budget constraints.”
Marylou Sudders, state secretary of health and human services and the Connector board’s chairwoman, said the staff worked until the last minute on a solution, and no better options emerged.
Neighborhood Health is not the only Connector insurer posting large premium increases. Health New England, a Western Massachusetts plan serving 3 percent of the Connector enrollees, is raising premiums 17 percent, on average.
Ten health insurers are offering a total of 62 plans to Connector enrollees in 2017.
Felice J. Freyer can be reached at email@example.com. Follow her on Twitter @felicejfreyer.