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Health coverage rates will rise again

State's insurers predict hikes in 8-12% range

Massachusetts health insurers are predicting their rates will increase by about 10 percent next year for most residents covered through employer health plans, marking the eighth consecutive year of double-digit premium hikes.

Increases will range from 8 percent to 12 percent, depending on the type of coverage, according to a Globe survey of the region's major insurers. For some, however, the increases will be slightly lower than in previous years. Tufts Health Plan, for example, said most members' premiums will go up by 8 percent to 9 percent, compared with 10.2 percent to 11.5 percent this year.

"I see no end in sight to these increases," said Stuart Altman, professor of national health policy and dean of the Heller School for Social Policy and Management at Brandeis University in Waltham. "The only thing that's going to stop this is a meltdown of our healthcare system."

Altman said fundamental changes in the nation's healthcare system - such as capping payments or limiting access to care - are needed to slow the spending escalation. But barring a crisis, he said, such as a drastic rise in the number of uninsured, significant overhaul measures are unlikely.

The United States is one of only a few countries in which health insurance is most often provided as part of compensation by an employer instead of through a government-based system. While the increase in premiums is slowing in other parts of the country, many Massachusetts residents will face larger percentage increases in 2008 than they did this year.

"We're seeing rate increases of 9 to 12 percent next year, which is maybe a half a point higher than last year," said Tim O'Brien, senior vice president of sales for Blue Cross, Blue Shield of Massachusetts, the state's dominant insurer with about 3 million members. O'Brien said Blue Cross members, especially aging baby boomers, are demanding more medical care. In addition, new medical technology is driving up treatment costs.

Vin Capozzi, senior vice president of sales and marketing at Harvard Pilgrim Health Care, the state's second-largest insurer, with about 1 million members, said its rates will increase from 6 to 12 percent in 2008. That's a slight moderation from this year, when the smallest increases were 8 percent. Capozzi said most of the Harvard Pilgrim increase is attributable to higher bills from hospitals and doctors, rather than greater demand for services.

Brian P. Pagliaro, senior vice president of sales for Tufts Health Plan, cited new medical technology, such as PET imaging scans, as one factor driving up costs. But Tufts has managed demand for medical services by closely monitoring treatment for chronic conditions like diabetes, he said. "I think our increases are lower than all of our competitors," Pagliaro added. Tufts has about 635,000 members.

All three health insurers cited efforts to control costs, such as implementing so-called pay-for-performance programs in which physicians can earn bonuses for providing more efficient care. For instance, they can make more money by computerizing patient records. But O'Brien said that at Blue Cross such efforts have only slightly suppressed premium increases, as opposed to actually lowering premiums.

Earlier this week, the Kaiser Family Foundation said health insurance premiums nationwide increased 6.1 percent this year. It was the lowest rate of increase since 1999 and the fourth consecutive year in which the average premium increase declined.

The 6.1 percent increase was still more than twice the rate of inflation, 2.6 percent, and larger than the average increase in workers' earnings, 3.7 percent. Since 2001, the foundation said, average premiums for employer-sponsored family coverage have increased by 78 percent, reaching $12,106 this year.

According to Hewitt Associates, the national increase last year was 7.7 percent.

Christopher Kardos, a healthcare consultant for Hewitt, said that when it comes to healthcare, Massachusetts residents have expensive tastes.

"People want access to the name-brand teaching hospitals," he said.

Allowing more patients to seek such care pushes up costs, Kardos said. In addition, Massachusetts residents have been unwilling to adopt strategies that have helped alleviate healthcare cost increases in other parts of the country. Fewer companies here have adopted so-called consumer-directed health plans than elsewhere. Under those plans, patients have larger copayments and deductibles. Proponents of consumer-directed plans say that when patients are made responsible for a larger share of the cost of their medical care, they seek lower-cost providers.

"New England is more focused on maintaining a status quo plan design," said Kardos.

Also, he said, fewer employers are trimming healthcare benefits to control costs. The practice was more common a few years ago, when annual increases were considerably higher.

Peter Markell, vice president for finance of Partners HealthCare System Inc., said his hospitals have little choice but to raise prices when nursing salaries -- a large component of overall labor -- increase by as much 8 percent a year. But doctors and hospitals also have to focus more on efficiency to control costs, he said.

Markell said boosting efficiency is part of providing quality healthcare. "We've made good progress, but we have a ways to go," he said.

Jeffrey Krasner can be reached at

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