Short-term insurance buyers drive up cost in Mass.

Lawmakers look to close loopholes

By Kay Lazar
Globe Staff / June 30, 2010

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The number of people who appear to be gaming the state’s health insurance system by purchasing coverage only when they are sick quadrupled from 2006 to 2008, according to a long-awaited report released yesterday from the Massachusetts Division of Insurance.

The result is that insured residents of Massachusetts wind up paying more for health care, according to the report.

“The active members subsidize some of the costs tied to those individuals who terminate within one year,’’ the report says.

The report was released as state lawmakers consider proposals to make it harder for consumers to jump in and then dump their health insurance coverage.

A bill sponsored by Senate President Therese Murray aims to close many of the loopholes by, among other things, allowing consumers buying their own insurance to do so during just one month per year, as is the case with many employer-sponsored health plans.

The number of people engaging in this phenomenon — dumping their coverage within six months — jumped from 3,508 in 2006, when the law was passed, to 17,177 in 2008, the most recent year for which data are available.

“We believe [Murray’s] fixes could effectively address the gaming in the system — which we believe is adding as much as $300 million dollars to the health care system in Massachusetts’’ each year, said Tara Murray, spokeswoman for Blue Cross Blue Shield of Massachusetts, the state’s largest insurer.

Governor Deval Patrick has filed legislation that would also address this issue, although it does not go as far as Murray’s. It would restrict enrollment for consumers who are buying insurance on their own to two annual periods, in June and December, but include exceptions for people facing life changes, such as loss of workplace insurance or the birth of a child.

When state lawmakers overhauled the health care system in 2006, they combined into a single insurance pool consumers who buy coverage on their own with those who get insurance through their jobs at small businesses that employ 50 or fewer people. The aim was to make insurance more affordable for the individuals buying coverage on their own, who tended to be sicker and therefore had been paying very high premiums. And the hope was that having small businesses and their workers absorb some of the cost of covering this group would raise their premiums only modestly.

But insurers said consumers who work for small businesses are shouldering a much larger burden. Part of the reason, they said, are these short-term buyers of insurance.

Kay Lazar can be reached at

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