Massachusetts insurers sue over rate-hike rejection

Massachusetts’ health-care overhaul has been seen as the laboratory for ObamaCare, with its heavy government control and its mandates on individuals and insurers.  Governor Deval Patrick has steadfastly denied that the “reforms” first implemented in the Bay State have created out-of-control costs, but earlier this month his insurance commissioner rejected applications by insurance companies to raise their rates to cover those increases.  Now the insurers have sued Massachusetts in a battle that will expose the spiraling costs of government intervention (via The Corner):


A half-dozen health insurers yesterday filed a lawsuit against the state seeking to reverse last week’s decision by the insurance commissioner to block double-digit premium increases — a ruling they say could leave them with hundreds of millions in losses this year.

The proposed rate hikes would have taken effect April 1 for plans covering thousands of small businesses and individuals. Insurers wanted to raise base rates an average of 8 percent to 32 percent; tacked on to that are often additional costs calculated according to factors such as the size and age of the workforce. …

Governor Deval Patrick has made reining in runaway health care costs a centerpiece of his administration and his campaign for reelection — contending they are stifling the capacity of small businesses to create jobs. At the same time, health insurers argue that government is forcing them to sell policies at a loss that is unsustainable as the costs of medical services climb.

The reforms in Massachusetts, created during Mitt Romney’s term as governor, intended to bend the cost curve downward on medical care, much as Democrats claimed to do with ObamaCare using the same model.  It didn’t work out that way, as the Boston Herald notes in its editorial today.  And the Herald also points out the hypocrisy of Patrick in insisting that all is well on one hand while screeching about cost increases on the other:

When Treasurer Tim Cahill said that taking our health care system national could “wipe out the American economy within four years,” the Patrick administration scoffed. They quoted favorably a Massachusetts Taxpayers Foundation report that found our version of health care reform costs less than 1 percent of the $27 billion state budget.

All’s well, says Patrick.

Then there are the folks hitting the panic button over the disastrous impact of our local Obamacare system. They’re implementing price controls on premiums and proposing radical plans like capitation to fight the surge in costs set off by Massachusetts “reforms.”

And leading the fight against the devastating effects of Obamacare on our local economy?

Gov. Deval “We’re Doomed!” Patrick.


In fact, the cost to Massachusetts is far higher, almost a billion dollars, by the analysis of Patrick’s office.  That $913 million is about seven times more than the initial cost of $133 million from just a few years ago.  That just covers the state-supplied subsidies for health insurance, not the costs to providers.

As more people come into the system, the demand drives up the costs.  Thanks to price-setting, supply hasn’t risen to meet demand, which means that costs have shot upwards as resources become more scarce.  With more people on the plans, insurers get squeezed in both directions.  The Wall Street Journal reports that Massachusetts insurers lost 12 cents on the dollar last year on average — and that’s with the 2009 rates in place that Patrick and his administration want to freeze for insurers in 2010 and beyond.

That’s not just a Massachusetts problem.  That will also happen on a national scale, since we’re about to impose a very similar system of mandates and price-fixing on wide swaths of the health-care industry.  Patrick and his administration might just succeed in bankrupting insurers in Massachusetts, but they’ll just get there a little more quickly than their colleagues in the rest of the country.

Will insurers win in court and force Patrick to account for the very real cost increases that Massachusetts’ “reform” created?  Or will the collapse of the insurers have to come before Massachusetts voters understand the real price of the nanny state?  Either way, there will shortly be an accounting for MassCare, and it won’t be pleasant for anyone.


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