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Massachusetts Department of Insurance Denies Health Insurance Rate Increase

MedSave Admin | April 23, 2010

Health insurance providers in Massachusetts wanted to drastically raise premiums on their health insurance coverage for many different types of customers. In a controversial move, the state of Massachusetts says that it's not going to let that happen. The Massachusetts Department of Insurance reviewed nearly 300 proposed rate hikes and denied almost all of them. Insurance companies aren't happy about the situation, but it might be the right thing for consumers.

Rate Increases Cause Controversy

There were 274 proposed rate increases that were reviewed by state legislators. The majority of these were deemed excessive. For example, insurers wanted to raise the base premium rate for small business medical insurance from 8% to over 30%. State legislators deemed that this was an unreasonable rate increase. It could have a detrimental effect on small businesses. Fewer than 40 of the proposed rate increases were approved.

The Massachusetts insurance companies say that the refusal to allow premium rate hikes is going to crush their ability to do business. Insurance company representatives say that they could lose as much as $100 million in profits during 2010 because they aren't going to be allowed to raise their rates. This is something that the insurance companies aren't used to. Prior to this recent situation, the state had never before refused to allow the industry to raise premiums on medical insurance.

The state regulators say that the health insurance industry is over-estimating the amount of losses that they are likely to incur. The insurance companies are allowed to continue collecting premiums at their most recent rates. Since rates are raised by most companies every month or every quarter this should reflect very little change in the insurance company's profit margins for the upcoming year.

Denial of Rate Increases May Be Good for State Residents

The Massachusetts legislature seems to be doing the right thing in this situation. They are protecting the rights of consumers who need health insurance at an affordable rate. Allowing health insurance companies to raise their premiums by such drastic amounts in a single year could have horrifying effects on customers. Small businesses, for example, may be unable to offer affordable medical insurance or even to hire new staff if their rates were raised so high.

One good argument that is made by the insurance companies, however, is that they are dealing with rate increases themselves. Doctors and hospitals are charging them more and more. If they don't raise their premiums then they have to eat those costs themselves. In this economy, they can't afford to take those losses. One solution would be for the state to implement caps that would limit the costs doctors are allowed to charge the health insurance companies. This solution would benefit everyone, keeping insurance premiums low and health care affordable.

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