Health insurers sue Massachusetts over 'premium rate caps'

Health insurance companies in Massachusetts are fighting back after the state's insurance commissioner last week rejected 235 of 274 proposed rate hikes, effectively implementing a premium rate cap. Six insurers--five of which belong to the Massachusetts Association of Health Plans, as well as Blue Cross Blue Shield of Massachusetts--filed a suit in Suffolk Superior Court, calling the cap a "reckless decision...based in politics." 

The proposed rate hikes averaged between 8 and 32 percent. Massachusetts Gov. Deval Patrick and insurance commissioner Joseph Murphy called the numbers "excessive," and said that increases should instead be around 5 percent--on par with the medical consumer price index. 

Small business leaders like Jon Hurst, president of the Retailers Association of Massachusetts, agree with Patrick and Murphy. "Big healthcare...has been living in an alternate economic universe," Hurst said. "They seem to have no understanding of what small businesses and their employees are going through in this recession. They cannot be allowed to continue to demand double-digit increases on Main Street during this difficult economy, while at the same time they are benefiting from the mandated health insurance law." 

However Richard Epstein, a professor of law at the University of Chicago, sided with the insurers, saying that the cap, and a similar one imposed in Maine, essentially "shoots the messenger" rather than addressing the real issue of rising healthcare costs." 

"Make no mistake about it, these healthcare insurers aren't clamoring for the impossible by insisting monopoly profits in a competitive industry," Epstein writes for Forbes. "They are asking only for rate increases that cover their losses from supplying the rich set of mandated benefits for all insureds, including those with pre-existing conditions."

To learn more:
- read this Boston Business Journal article
- read this Associated Press piece
- read Epstein's column in Forbes
- check out this press release from the Massachusetts Division of Insurance
- here's a press release from Blue Cross Blue Shield of Massachusetts

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