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Health Spending Hits Benchmark But Employer Premiums Rise

Posted on October 24, 2019

Spending on health care in Massachusetts met a key state benchmark for 2018, but employers and their workers continued to pay significantly more for health insurance coverage, according to a new report.

health_careThe Massachusetts Center for Health Care Information and Analysis (CHIA) reported last week that health-care spending increased 3.1 percent from 2017-2018, equal to the goal established under the 2012 state Health Care Cost Control law.

But insurance premiums soared 5.2 percent, while the amount of cost-sharing assumed by employees rose 6.1 percent. Wages and salaries grew 2.8 percent during the same period as health costs continued to outpace earnings.

“The cost of providing health insurance remains a priority concern for Massachusetts employers. The report underscores the need to ensure that the prices paid by employers and their workers reflect the overall trends in health-care costs,” said Brooke Thomson, Executive Vice President of Government Affairs at AIM.

CHIA released its report last week in advance of the annual Cost Trends Hearings in Boston on Tuesday and Wednesday. Several AIM-member employers are scheduled to testify.

Among the highlights:

Below are a number of highlights with particular relevance for employers:

  • Premiums for fully insured plans in 2018 increased 5.6 percent after rising 4.9 percent in 2017.
  • Cost-sharing rose along with premiums by 5.5 percent in 2018, after a 6.5 percent increase in 2017. Fully insured members paid more and experienced faster cost increases than members in self-insured plans.
  • Enrollment in high deductible health plans (HSHP) surged 31.5 percent. The increase was especially pronounced among small businesses. Meanwhile, enrollment in tiered and limited network plans remained largely the same.
  • Total expenditures for MassHealth – the state’s public health insurance program for low-income people – remained flat while the number of people enrolled in MassHealth decreased.
  • Net of prescription drug rebates, pharmacy spending was $8.1 billion, an increase of 3.6 percent from the prior year.
  • Hospital services, physician, and pharmacy expenditures continued to be the largest service categories of Total Health Care Expenditure (THCE) spending.

About three in five Massachusetts residents are covered through private health insurance. More than 93 percent of those in private health insurance receive coverage through their employer.

Sixty percent of private commercial health insurance members were enrolled in self-insured ESI plans. In the commercial market, approximately 60 percent of people were self-insured through either a large employer or the Group Insurance Commission.

AIM and its member employers have launched several initiatives to control health spending, including an effort to reduce inappropriate use of emergency departments by 20 percent in two years. State officials estimate that a significant number of ED visits are potentially avoidable, a pattern that costs $300-$350 million annually for commercially insured members.

Governor Charlie Baker on Friday introduced a sweeping health care bill that puts a new focus on primary and mental health care, while reining in physician and hospital billing practices, penalizing drug companies that sharply increase prices, and infusing struggling community hospitals with new funds. It would prohibit surprise medical bills for emergency and unplanned services, and it would limit the use of hospital facility fees.

“The year 2018 marked the second consecutive year in which employers and workers did not see the full benefit of moderating health-care spending. Massachusetts cannot continue to support a system in which the premiums paid by employers and their workers rise faster than the underlying cost of health care,” said John Regan, President and Chief Executive Officer of AIM.