Insurers lose Round 1 in Massachusetts court fight over rate hikes

A Suffolk Superior Court judge did not grant six Massachusetts health insurers a preliminary injunction that would have allowed them to institute 235 proposed rate increases that had been rejected by the state's insurance commissioner, reports the Boston Globe. The insurers had planned to increase premiums on April 1 by an average of 8 to 32 percent for some 50,000 policies covering 200,000 small business and individual policyholders, and contended that failure to implement the rate hikes immediately would cause too much damage to the insurance industry, forcing a collective loss of more than $100 million this year alone.

However, Judge Stephen Neel ruled that the insurer's didn't present "compelling evidence" that their businesses would be "irreparably crippled over the next few months if injunctive relief is denied," reports the Gatehouse News Service for the Daily News Transcript. In the written ruling, Neel pointed out that the insurers' own data indicated that "the reserves and solvency of the Plans are stable, and should continue to be so in the near term."

Neel also agreed with the state's argument that the insurers hadn't taken advantage of all administrative options before filing the lawsuit. Insurers have 15 days following a ruling to appeal any rate rejections, according to Division of Insurance regulations. However, of the six insurers taking part in the lawsuit, only three had appealed by April 12: Harvard Pilgrim Health Care, Blue Cross Blue Shield of Massachusetts and Tufts Health Plan. Health New England, Neighborhood Health Plan and Fallon Community Health Plan hadn't yet appealed despite receiving multiple rate hike rejections.

Neel also didn't grant the insurers' motion for an expedited trial.

The judge's ruling is considered a victory for Gov. Deval Patrick, who in February had publicly announced that his administration would reject premium increases that were too high. (Based on a medical inflation rate of 3.2 percent, the Patrick administration felt a 5 percent rate increase would be adequate.)

However, the insurers indicated they would continue the fight the state's attempt to cap premiums, maintaining that Insurance Commissioner Joseph Murphy doesn't have the legal authority to reject rate increases or to link rate increases to medical inflation costs. The Massachusetts Association of Health Plans is "confident in the merits of our case." The association said it will "consider all of our available options in light of today's ruling."

Blue Cross and Blue Shield of Massachusetts also is "confident in the final outcome of the case," says Jay McQuaide, vice president. The state's largest health insurer believes it will be able to demonstrate that the rate hikes "are appropriate and reflect the expected medical costs of insuring these customers.''

While any Division of Insurance appeals filed by insurers are under way, 2009 small-group market base rates will be in effect. The insurers could--and are expected to--move forward with the legal battle if those appeals fail.

To learn more:
- read this Boston Globe report
- read this Daily News Transcript article
- read this Christian Science Monitor article

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