Health insurers get tough in MA

I’m always interested in what’s up with health insurance in Massachusetts. Obamacare is basically what Massachusetts adopted in 2006, so what you see now in Massachusetts is what you are likely to see nationwide around 2016 to 2018, a couple years after Obamacare cranks up in earnest. Boston.com reports:

Massachusetts health insurers say they want to freeze or slash payments to some hospitals and large physician groups this year, setting up the toughest contract negotiations in memory and creating the potential for disruptions in where patients get their care. Other providers would get small increases, at most.

Unlike in past years, insurers believe they have widespread backing from politicians, regulators, and employers to aggressively push back against large price increases, even if it means some unhappy providers drop out of insurers’ networks, forcing patients to find new doctors and hospitals.

Health insurance costs grew so much over the last generation in part because there was no mechanism to enforce price discipline in competitive insurance markets. The insurer that tried to cap provider costs found its health networks shrinking as doctors and hospitals fled. And if the network got too flimsy, customers left, too. It was much easier for the insurer to pass along rate increases and blame the hospitals and doctors.

That’s also how cost shifting – the overcharging of patients with private insurance to make up for shortfalls in Medicare and Medicaid funding – was able to take hold, too. I mean, in what other industry can you overcharge one set of customers because another set of customers held down what it got charged? Think if the entire market operated with cost shifting. If, say, UnitedHealth negotiated a good deal, Blue Cross would “have to” pay more to make up for it.

In Massachusetts, though, all of the insurers are in the same boat – they are restricted in how much more they can charge.

Last month, the Division of Insurance blocked insurers from substantially raising premiums for small businesses and individuals who buy their own coverage, and the state Senate last week passed Senate President Therese Murray’s measure to expand regulators’ authority over insurance premiums.

As the state clamps down, each insurer is emboldened (well, forced) to negotiate in stronger terms. If all works as planned, costs increases will be muted, or as the current jargon has it, the cost curve will be bent downward. And if it works for Massachusetts, it might work for the rest of the country.

(via Kaiser Health News)

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