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AIM Announces Plan to Control Health Insurance Costs for Employers

Posted by Rick Lord on Mar 10, 2010 12:03:00 PM

Associated Industries of Massachusetts today announced a comprehensive proposal to control soaring health insurance costs for small employers while business, government and health care providers develop long-term solutions to the problem.

The AIM proposal calls for regulators to limit - temporarily - reimbursements to doctors and hospitals to the median cost for individual medical services in 2009. The proposal would also establish requirements for health insurance companies, which would be required to offer low-cost plans with reduced networks of providers, and could not spend more than 10 percent of consumer premiums on administrative costs.

A moratorium on new health-insurance mandates and "rate shock bumpers" for small employers and individuals are also part of the initiative.

AIM detailed the proposal Wednesday before a joint hearing of the Massachusetts Legislature's Committees on Health Care Financing, and Community Development and Small Business. I was pleased to testify at the hearing with Nancy Turnbull, senior lecturer at the Harvard School of Public Health and the consumer representative on the Commonwealth Health Insurance Connector Authority.

AIM's participation in the hearing underscored both our long-term commitment to health care reform and the immediate crisis facing small employers in Massachusetts seeking to provide health insurance to workers.

The proposal balances immediate rate relief with the need to maintain a free market. The approach differs from the cap on health insurance premiums and provider reimbursements proposed by Governor Deval Patrick, but we commend the governor for adding a sense of urgency to the debate over health insurance costs.

The time is now for offering some relief and we cannot let the fact that the solutions are hard to implement or disruptive of the status quo be an excuse for not forging ahead to resolve the health care cost conundrum.

Because medical inflation has exceeded general inflation by a wide margin in recent years and given that Massachusetts health care costs exceed the national average by 15-30 percent, depending on the study, the cost of health insurance has become an impediment to job growth and economic development in the Commonwealth. Both employer and the government must demand a more transparent, efficient method for our health care delivery system and a more rational and outcome-driven compensation methodology for our payment system.

AIM supports limits on medical payments and administrative costs only as temporary and emergency measures to help small employers pushed to the brink of insolvency by insurance rate increases of up to 40 percent. The fact that an organization like AIM that is dedicated to private enterprise supports government price intervention in this form reflects the fact that the health care market is unlike any other market, and that market is broken.

The long-term prescription to heal the market includes payment reform that lowers health premiums for employers and individual consumers. It also includes the development of health resource planning capabilities; enactment of malpractice reform and peer review statutes; implementation of administrative simplification measures; and consumer engagement.

Employers supported the 2006 Massachusetts Health Care Reform and have paid repeatedly to expand coverage to fellow citizens through fair share contribution, safety net trust fund surcharges, increased premium rates, increased take up of employer sponsored insurance and increased taxes going to fund public health program expansions.  It's now time for doctors, hospitals, clinics and health insurers - those who know health care best - to develop the long-term, market solutions that will ensure an affordable and functional health system for the citizens of the commonwealth.

The proposal to limit reimbursements would allow providers who charge rates below the 2009 median to continue operate as they do now, negotiating rates with health plans. Medical providers who charge more than the 2009 median would have reimbursements tied to the rates paid by Medicare , plus a percentage that lawmakers would determine. The plan reflects recent findings by Attorney General Martha Coakley that medical costs are unrelated to the quality of care:

"Price Variations are not correlated to (1) quality of care, (2) the sickness or complexity of the populations being served, (3) the extent to which a provider is responsible for a large portion of patients on Medicare or Medicaid, or (4) whether a provider is an academic teaching or medical facility. Moreover, (5) price variations are not adequately explained by differences in hospital costs of delivering similar services at similar facilities . . . Price variations are correlated to market leverage as measured by the relative market position of the hospital or provider group compared with other hospitals or provider groups within a geographic region or within a group of academic medical centers."

AIM urges the Massachusetts Legislature and the administration to move forward on health care cost-control as soon as possible. The employers of the commonwealth cannot wait.

Topics: Associated Industries of Massachusetts, AIM, Health Insurance, Richard Lord

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