BOSTON — The net worth of health insurance plans in Massachusetts swelled during the pandemic years, as ratepayer premiums continued to climb and more and more Bay Staters have opted into high-deductible plans.
As of December 2022, the net worth of health insurance companies in Massachusetts exceeded $6 billion, representing a 20-percent increase from 2019 to 2022 and a 34-percent cumulative increase since 2018, according to a recent report from the Massachusetts Hospital Association.
The health plans say their increasing net worth is partially thanks to some good years in the stock market, and that surpluses and reserves are important for stability in uncertain times — especially after insurers gave payers breaks during the COVID-19 pandemic.
Overall profitability at acute care hospitals in Massachusetts was also on the rise in the most recent data available, for hospital fiscal year 2021, which for most hospitals ran through September 2021. The state Center for Health Information and Analysis reported hospital profitability increased 2.6 percentage points compared to the prior hospital fiscal year.
The fiscal status and outlook varies from hospital to hospital, and health systems that serve disproportionate numbers of patients on Medicaid have said they are struggling.
Meanwhile, premiums have increased at a faster annual rate than both wages and regional inflation. Premiums increased at an annualized rate of 4.7 percent between 2019 and 2021, CHIA reported. The claims covered by payers and employers increased 5.7 percent.
In the same two-year period, wages and salaries in Massachusetts only increased 2.6 percent and regional inflation rose 2.2 percent, falling behind the growing health care costs, according to CHIA.
As premiums have surpassed increases in income, the portion of what patients pay to see the doctor has also gone up.
Private commercial health plan member cost-sharing increased by 16.9 percent in 2021, to $58 per member per month, according to CHIA’s annual report. At the same time, the number of people looking to save money on swelling premiums by opting into a higher deductible plan has grown.
Enrollment in high deductible health plans, which require more out-of-pocket expenses until deductible thresholds are reached, grew by 4.1 percent in 2021 — now accounting for 42.7 percent of total enrollments in the private commercial market.
“Each passing year we end up paying more for less coverage,” said Jon Hurst, president of the Retailers Association of Massachusetts.
The Massachusetts Health and Hospital Association’s semi-annual health plan performance report, which is not public but was shared privately with member hospitals, shows that plans had $4.5 billion in reserves in 2018, compared to $6.06 billion in 2022.
“In spite of the pandemic, which led to hospitals postponing elective procedures, patients deferring care, and a decrease in total healthcare expenditures in 2020, health plans continued to increase premiums and add to their surplus,” wrote MHA, who often goes head-to-head with the state’s health plans, about the report in their weekly newsletter. Hospitals and insurers negotiate rates between themselves.
Rising care costs
Insurers carry a surplus to ensure they have funds to meet their obligations if an unexpected event occurs.
Lora Pellegrini, president of the Massachusetts Association of Health Plans, said the pandemic showed why it was important to have reserves to tap into.
“No one was unjustly enriched during the pandemic. The plans did a lot of things to support the state, the providers, our community and our members,” Pellegrini said. “Employers, some of them couldn’t pay their premiums. We kept them on coverage, them and their employees, despite the fact they couldn’t pay their premium … We did it and we dipped into reserves and surplus to pay for those things.”
She added, “That’s what you want — you want a stable health plan.”
Pellegrini said health insurers have had to raise premiums because providers and pharmacies are increasing costs.
“Premiums reflect the cost of care,” she said. “You have to look at the underlying reasons. The prices charged by providers, the unit prices, which are among the highest in the nation and prescription drug costs. Any solution to bring down premiums, to stabilize premium increases, you have to address those two things.”
Alex Sheff, policy director for the consumer advocacy group Health Care For All, said recent premium hikes are part of a larger trend over the last 20 years of rising health care costs.
“The burden can’t be borne solely by consumers,” Sheff said. “What we need in terms of the system costs now is to rein in some of the costs at the highest price hospitals, prescription drug companies, to have stronger rate review processes for insurance companies around premium hikes.”
Hurst said small businesses are disproportionately impacted by the “death spiral” — as he described it — of rising health care costs.
Employees are moving to their spouse’s plans, self-insuring or turning to the cheaper state-run marketplace known as the Massachusetts Health Connector, Hurst said.
As younger, healthier employees with other insurance options opt out of coverage through their jobs, older employees who may be prone to more health issues are left to pay more.
The pool of people insured in Massachusetts’ small group marketplace (for businesses with 50 or fewer employees) has shrunk from 822,000 in 2006 to 335,000 in 2022 — a 59 percent decrease, according to data provided by RAM.
“The problem for small businesses is it makes them less competitive. We’ve all seen what is happening with the labor market, right now it’s all about recruitment and retention of employees. and if you’re not competitive with health insurance, you’re put at a huge disadvantage with large business competitors,” Hurst said.
He added, “The health plans and the hospitals go at each other’s throats … but they both make more money by raising premiums. and what that creates is unaffordable medical inflation.”
Hurst said that state-run programs to relieve high insurance costs put greater pressure on small business plans.
Subsidized coverage expansion
Gov. Maura Healey signed a fiscal year 2024 budget last week that included a two-year pilot program to expand the income limits for ConnectorCare from 300 percent of the federal poverty level to 500 percent. The state advertises ConnectorCare insurance as offering “$0 or low monthly premiums, low out-of-pocket costs, and no deductibles.”
Under the new program, an individual making $72,900, or a family of four that brings in $150,000 will be eligible for this coverage.
Hurst said the pilot will “accelerate the problem for small businesses,” as more employees that now qualify move to the lower cost health insurance, and higher costs shift to those left on the small group plans.
At a Health Connector Board meeting on Monday, Health and Human Services Secretary Kate Walsh asked Audrey Morse Gasteier, Health Connector executive director, about the effects of the pilot on those insured through small businesses.
“To be eligible for ConnectorCare, one cannot have access to affordable employer-sponsored insurance, either be in it or have it made available to them. So completely different. There’s no, sort of, cannibalization occurring,” Gasteier responded.
Pellegrini said the association of health plans also raised concerns about the ConnectorCare expansion, though they did not formally oppose it when it got to the governor’s desk.
“But this is going to require continued review, and after two years that is going to be a huge additional financial obligation on the state and it will impact the merged market,” Pellegrini said.
An estimated 50,000 people are newly eligible for the state-subsidized plans. The expansion will cost the state $130 million for calendar year 2024, Health Connector Director of Communications Jason Lefferts said.
Sheff of Health Care For All said the ConnectorCare expansion is “life changing” for some in the wake of rising health care costs.
Kara Foster, a Taunton-based bus driver, is one of the estimated 50,000 people who recently became eligible for state-subsidized coverage. Foster said she loves her job, where she helps transport students with disabilities, but doesn’t get coverage through her employer.
Her husband just retired and Foster was worried about losing access to his insurance, she said.
“This whole process of my husband retiring, and then needing health insurance was a whole thing. I was like, ‘Do I leave my job I love, to go to sit in a company’s cubicle so I can get insurance?’ “ Foster said.
The bus driver is on four medications and said she was worried about what they were going to cost and if she needed to find alternative options.
“This will change everything for me,” she said