Federal Government Plan Based on Massachusetts Plan Proves Worrisome

There are many that don’t know what to expect when the new health law is fully enacted. To see the results, take a look at the current universal health care plan in Massachusetts, a plan that is “essentially identical” to the national plan, according to President Obama.

The Massachusetts program was intended to insure all state residents, while decreasing costs. It has not fulfilled the second objective.

The plan, passed in 2006, is struggling along. In order to contain costs, Governor Duval Patrick imposed artificial price caps on premium rates earlier this year. In April, his insurance commissioner rejected 235 of 274 requests for increases by insurers, despite insurers finding them necessary to cover claims expenses.

The result of capping premium rates has started to come to light. The state’s five major insurance companies have lost $116 million so far. Three of those insurers are now under administrative oversight because of concerns over their financial stability.

With health care costs rising eight percent on an annual basis, the arbitrary cap not only prevents insurers from earning a profit; it keeps them operating at a loss. The cap was based on what the Duval administration felt it should be and not what actual figures calculate.

The caps are forcing insurers to pass along costs wherever they can. This is negatively impacting employer-groups. According to one study, the Massachusetts plan increased private employer-sponsored premiums by about six percent above what they would otherwise have been.

The “guaranteed issue” provision of the legislation allows an individual to enroll in a plan at any time of their choosing, regardless of their current medical condition.  A recent study in Massachusetts found that many people are using this aspect of the system to their advantage. They are purchasing insurance right before they are about to incur major medical costs, and then dropping coverage after.  A legislated penalty for not maintaining coverage was intended to prevent this type of behavior, but most find it cheaper to pay the penalty than the premiums.  The new Federal Plan has even lower penalties prompting speculation that what is happening in Massachusetts will happen on a larger scale with the Federal Plan.

As you would imagine, this behavior adds to the financial losses being incurred by insurers by saddling them with the cost of care without the benefit of collecting premiums.  Further, as the underlying cost of healthcare continues to rise unabated, the gap between premiums and penalties will continue to grow.

Cost containment of medical expenses is what is really necessary. The current Massachusetts administration is capping premium rates instead and not focusing on the real problem. The federal government says they are modeling their program on Massachusetts’. The federal government should learn from the state’s mistakes instead of repeating them.