Businesses Question New Insurance Rates
It’s a scenario familiar to many small business owners in Central Massachusetts.
Back in the spring, Kathleen Mills, who runs a one-woman HR consulting firm in Leominster, heard from Worcester-based Fallon Community Health Plan that her health insurance rates would be rising by 25 percent. When the state Division of Insurance blocked Fallon and other insurers from raising their small-group rates, she drew a breath of relief. Then, just weeks ago, she got another letter from the insurer, telling her that it had won an appeal with the division and she could expect her rates to rise.
“I’m not even sure what that means,” Mills said, adding that it was not made clear to her when the newly approved rates go into effect, or if they new rates will be retroactive to April.
According to David Przesiek, vice president of sales for FCHP, the insurer has now decided that, for subscribers who renewed their coverage in April, May or June, rates will rise the full amount originally announced in the spring. The change will go into effect Sept. 1, and no one will be charged retroactively for the months they were paying the 2009 rate.
At this writing, Przesiek said, the insurer is still negotiating the rates for small businesses that renewed after June.
All of the state’s other insurers have already worked out deals with the division, and none of them involved retroactive billing. But, like FCHP’s, they did involve big jumps in the cost of insurance.
Matter Of Perspective
Based on the numbers released by the state and the insurers, the back-and-forth discussions between the two parties seem to have significantly held down the total cost of health insurance for most small businesses this year. But there’s no doubt that the price has still risen dramatically from 2009, and the way the new rates went into effect makes it hard for many business owners to see the money they may be saving.
Christine Pilch also owns a one-woman business, a marketing company in Ware called Grow My Company. Pilch gets her insurance through Blue Cross Blue Shield of Massachusetts. Like Mills, she received notice in the spring that her rates would rise by about 25 percent, only to see them frozen by the Division of Insurance.
Now the other shoe has dropped for Pilch. Blue Cross Blue Shield recently reset her rates. Where the insurer had originally said her monthly premium cost would rise to $509 in April, it’s now gone up to $503, a savings of just $6 a month.
That’s left her furious with the Division of Insurance.
“They basically just caved in to the insurance company,” she said. “They did nothing for me. I can only say that the Division of Insurance and the Commonwealth of Massachusetts failed me as a small business.”
The way Joseph Murphy, commissioner of the division, sees it, though, business owners like Pilch have saved a bunch. Figures from the various insurance companies show the original proposed increases in rates for small businesses ranged from 7 to 34 percent. After settlements with the division, most jumped no more than 10 percent.
But Murphy said those final numbers represent averages over the year. Many companies whose plans started in April saw no increase at all in the base rate for several months. That means a sudden jump of 25 percent in September might represent a significantly smaller increase when taken on a yearly basis.
Murphy said some small businesses he’s talked to have saved as much as $50,000 on their annual line item for health insurance.
“They’ve experienced significant savings over what the proposed rates were,” he said.
The Age Factor
Murphy said another factor that muddles the discussion is the difference between base rates and actual rates. An increase in the average age of a workplace will drive rates up, even if the insurer’s base rate stays the same. That’s especially significant in light of recession-driven layoffs since many companies have “last in, first out” policies that make younger workers more likely to lose their jobs.
But if small businesses have good reason to complain, the insurance companies may too. FCHP reported a net loss of $12.8 million for the second quarter of 2010, which it claimed was largely a result of the rate freeze. Other Massachusetts insurers also said the rate freeze created a major financial burden.
To Russell Swallow, president of Benefits Lab Insurance Agency Inc. in Worcester, the Division of Insurance’s actions look like “political grandstanding.” Swallow said the rates freezes are equivalent to simply demanding that a manufacturer hold down its prices without doing anything about what its suppliers are charging.
Murphy said accusations that his actions are politically motivated are misplaced, and he said the voluntary settlements with the insurers are the start of a “collaborative process” to control costs. But he agreed that further government action, including legislation focused on hospitals and other providers, is needed to truly control health costs.
For FCHP subscribers, part of the frustration has been that they have had to wait so long to find out what their health insurance costs will be. Przesiek said he understands that concern and hasn’t been thrilled at how long the discussions with the Division of Insurance have dragged on.
“Basically we’re as frustrated as anybody,” he said.
But Przesiek said he isn’t particularly worried that small businesses will switch from FCHP to another carrier when they see their September bills.
“We’re a high-quality, low-cost provider, and I think even given the rate increase we’ll maintain that position,” he said.
Michael Lanava, business resource manager at the Worcester Regional Chamber of Commerce, agreed.
“I don’t see a big exodus from FCHP,” he said.
Lanava said the insurer has been a leader in introducing affordable plans for small businesses, with cost saving devices like limited networks or higher deductibles.
Mills said she hasn’t thought much about the idea of switching from FCHP to another provider, but she has been anxious to find out what her final rate will be.
“You’re kind of left in limbo,” she said.
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