Globe Editorial

Insurers must bargain harder, not just pass along high costs

June 30, 2010

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IN THE bitter clash over health insurance rates between the Patrick administration, the big insurers, and the powerful hospital chains and doctors’ groups, it’s easy to forget who is suffering the most: the small businesses facing rate hikes of up to 32 percent. Massachusetts cannot let this most job-creative sector of the economy fall victim to the latest twist in the rates fight — the decision last Thursday by a state appeals board to overturn a Division of Insurance ruling that many of the rates charged by Harvard Pilgrim Health Care to its small-business clients are too high.

Those double-digit increases were indeed too high, and the solution is obvious: A more modest increase for customers, with the difference covered by lower profit margins for insurers and lower reimbursements to hospitals and doctors. At every level, insurers and providers must strive to make sure that waste is cut, not services. Only such a concerted effort, step by step in the process, can succeed in reducing the staggering rate of medical-care increases.

Back in April, the Division of Insurance turned down rate hikes for more than 200 plans for small businesses and individuals, correctly ruling that insurers had not bargained hard enough with hospitals to keep the increase in reimbursements close to the New England medical consumer price index of about 5 percent.

Last Thursday’s overturning of that decision, which Attorney General Martha Coakley should appeal, is deeply unfortunate. It affects only the Harvard Pilgrim plans, but there is a real danger that it will send a signal to insurers and health providers that the pressure to reduce both insurance rates and hospital charges is off.

That outcome would undermine the painful but necessary attempt to get the health care industry to do what so many other industries have had to do — find ways to streamline their operations amid a deep economic downturn. The April rejection of insurers’ rates had been, as Governor Patrick described it, a way to start a conversation over health and insurance costs in the state. To hold up their end of the conversation — and earn the 10 percent of premiums they pocket — insurers have to work harder than ever to get hospitals to keep their charges in check.

The state is right to turn up the pressure. Hospitals and health insurers must make a determined effort to keep their rate increases in the low single digits. Anything higher runs the risk of strangling small businesses at the precise moment when hiring is starting come back.

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