First, the good news – spending on health care in Massachusetts increased a modest 2.3 percent during 2013, well below the 3.6 percent objective set in the 2012 health-care cost control law. Health insurance premiums, adjusted for inflation, declined during the year, while benefit levels remained virtually unchanged.
Now, the bad news – The increase in medical spending exceeded the 1.5 percent rate of inflation as Massachusetts patients spent $50.5 billion - that's $7,550 per person – on medical care last year. Massachusetts employers, meanwhile still pay the highest health-insurance premiums in the country.
The release this morning of the first comprehensive study of medical cost trends in Massachusetts is a riddle for employers struggling with the high cost of providing insurance to workers.
The fact that medical spending increases came in well below the overall rate of economic growth is a “win” for the economy, confirming AIM’s long-held positon that the benchmark should have been set lower – two percentage points below gross state product. At the same time, the easing of health spending and premium costs largely reflects a national trend that is unlikely to last as employers face rate increases from federal health reform in 2014.
Rick Lord, president of Associated Industries of Massachusetts, told radio station WBUR this morning that members continue to rate health care costs as their top concern.
“That’s not a big surprise,” Lord says, “because even though we came off a year where increases were pretty modest, “we also know that health care costs on a per-capita basis are the highest in the country, so that puts [employers in Massachusetts] at a competitive disadvantage.”
Individuals and small employers saw the largest increase in health-insurance premiums between 2012 and 2013, according to the Center for Health Information and Analysis (CHIA). Premiums for small groups of between one and 50 enrollees rose 0.4 percent, while those for mid-size groups of 51 to 100 enrollees jumped 0.5 percent.
Groups with 101-499 enrollees saw a 0.2 percent decrease and those with more than 500 enrollees saw rates drop 0.8 percent.
The CHIA report finds that almost two-thirds of all medical spending in Massachusetts comes through public programs such as Medicare and MassHealth. Those public programs are posting much faster spending growth than the private sector - commercially insured medical spending grew by 2.2 percent in 2013, while spending through Medicare rose 3.1 percent and MassHealth spending jumped 4.7 percent.
Massachusetts employers paid an average of three-quarters of total premiums in 2013, with employees footing the remaining 26 percent. Cost-sharing for medical care was unchanged between 2012 and 2013 at an average of $48 per member per month.
Employers also continue to migrate toward self-insured plans, under which an insurer provides administrative services but the employer holds the insurance risk for the coverage. Approximately 58 percent of Massachusetts members enrolled in commercial coverage were enrolled in self-insured coverage during 2013, an increase of one percentage point over the previous year.
The lull in premium increases during 2013 may have been the eye of the storm for small businesses, some of which encountered premium increases of more than 50 percent this year because of rating changes required by the federal Affordable Care Act (ACA).
The ACA limits to four the rating factors used to calculate small group health insurance premiums, while current Massachusetts law allows for additional consideration of factors such as industry, participation rate, group size, intermediary discount and group purchasing cooperatives.
A study by health insurance companies indicates that the rating changes have raised or lowered rates for small companies by up to 57 percent, on top of average increases of 3.7 percent in their base insurance premiums.
A separate survey by AIM found that 60 percent of small employers who renewed their health insurance policies on January 1 saw increased premiums. Among the employers who said they would consider making changes to their health plans as a result of the increases, 20 percent told AIM they plan to drop coverage all together because the price hikes are unaffordable. As one member said, “We have not had a pay increase in 12 years and an 18 percent increase in our insurance is deplorable.”
The most optimistic employers might look at the good news in the CHIA report and agree with G.K. Chesterton that “progress is a comparative of which we have not settled the superlative.” Most employers, however, will want to see a lot more progress on Massachusetts most-expensive-in-the-nation health costs before throwing around any superlatives.