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Gains due in part to patients delaying care because of cost
By Robert Weisman
Globe Staff / May 17, 2011
Four major Massachusetts health insurance companies yesterday posted strong financial gains for the first three months of 2011, a year after reporting steep first-quarter losses they blamed on the Patrick administration’s decision to cap premium increases.
The gains, which continued a rebound that started midway through last year, reflected factors also at play in the national health insurance market, including cost-conscious patients who are delaying medical care, a boost in investment income, and lower administrative spending.
A key driver of the companies’ improved fortunes was a decline in the number of insurance claims as more Massachusetts residents cut back on imaging tests, chose generic drugs, or postponed elective procedures such as knee replacements. That’s because employers are shifting more of the price of insurance to workers, resulting in higher copayments and deductibles.
“We’ve seen more people making very deliberate decisions on discretionary medical services,’’ said James DuCharme, chief financial officer at Harvard Pilgrim Health Care in Wellesley. “Almost 80 percent of our lower than anticipated cost trend is due to less utilization.’’ Combined, the four nonprofit health insurers reaped nearly $70 million for the three months ending March 31, compared with total losses topping $150 million for the same period last year.
The numbers mirrored a significant income increase reported Friday by Partners HealthCare System Inc., the state’s largest hospital group. The health plans’ quarterly results also coincided with a state legislative committee hearing on Governor Deval Patrick’s bill to ease the insurance burden by changing the way medical care is paid for, and attracted the attention of those who say insurers and health care providers have not done enough to lower medical costs.
“The rich get richer,’’ said Jon Hurst, president of the Retailers Association of Massachusetts. “There is growing anger on Main Street throughout the Commonwealth at how Big Health Care has increased their profits and their premiums during a tough economic downturn when most families have had flat or reduced income.’’
But Allen P. Maltz, chief financial officer for Blue Cross Blue Shield of Massachusetts, the state’s largest health insurer, said his company’s better showing came almost entirely from stocks and bonds, not customers. Boston-based Blue Cross lost money from its operations in the first three months of 2011, but it was more than offset by significant gains in the company’s investment portfolio.
Maltz said Blue Cross’s goal is to make a small operating gain each quarter while holding down premiums for customers through “global payment’’ policies that give doctors and hospitals an annual budget to provide patient care instead of reimbursements for separate visits and procedures. “We are making, at most, modest operating results,’’ he said. “We’re doing everything we can to keep health care affordable.’’
Harvard Pilgrim Health Plan registered the largest first-quarter gain: net income of $29.4 million, compared with a $27 million loss last year. It was followed by Blue Cross, which posted a $20 million net increase, reversing a $65.2 million loss a year earlier.
Fallon Community Health Plan of Worcester reported net income of $10.2 million for January through March, compared with an $8.5 million deficit for the same period last year, while Tufts Health Plan of Watertown had net income of $9.8 million, up from a $51.9 million loss in 2010.
Brian Rosman, research director for the Boston consumer advocacy group Health Care for All, said global payment plans offered by several insurers have helped slow the rate of premium increases, though more steps are needed.
“Insurers have been more aggressive . . . in coming up with new ways of paying for care and paying for quality,’’ said Rosman, who supports Patrick’s proposed health care payment overhaul. “But we think it’s critical for the state to establish the ground rules because it’s all happening in an unregulated way.’’
Some public policy professionals, however, said more moderate increases in premiums won’t provide a boost to the economy. To do that, they said, the price of insurance has to decrease.
“Consumers want to see premiums lowered, and they want their costs to go down,’’ said Deirdre Cummings, legislative director for the Massachusetts Public Interest Research Group. “One of the significant impediments to putting people back to work is the cost of insurance.’’
Nationally, almost all of the double-digit annual premium increases charged to employers in recent years have been passed on to their workers through higher deductibles and copayments, forcing many to postpone going to the doctor or having elective procedures, said Stuart H. Altman, national health policy professor at Brandeis University.
“There’s been a cutback in [health care] utilization, and the insurers have benefited,’’ Altman said. “Now the question is whether in the future it will lead to a moderation of premium increases. When the insurers are doing well, it puts more pressure on regulators to come down like a ton of bricks on them. They don’t have the flexibility they had in the past to raise rates without regard to what the state might do.’’
In Massachusetts, the largest health insurance market — covering small businesses and individuals — is dominated by nonprofit carriers that have said they are committed to reining in premium increases. Yet when the state insurance commissioner rejected their rate increases last year, the insurers sued state regulators and ultimately reached settlements limiting annual premium increases to less than 10 percent.
Those settlements saved businesses and individuals about $106 million, Patrick told the annual meeting of Associated Industries of Massachusetts last Friday. Since then, insurers have kept their proposed rate increases in the so-called small-group market to single-digit percentages.
Robert Weisman can be reached at weisman@globe.com.
© Copyright 2011 Globe Newspaper Company.
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