THE LEGISLATURE MADE “good, solid progress” with its end-of-session health care reform laws, said the longtime leader of the Massachusetts Association of Health Plans, but Massachusetts is still falling behind other states in some ways.
“I think what’s missing in the bills is anything really around affordability and cost containment,” Lora Pellegrini, MAHP president, said on The Codcast. “I think that is the number one issue facing the Commonwealth.”
The non-profit organization represents 13 health plans, including Medicaid managed care organizations and one behavioral health organization, among them nonprofits like Point32Health and WellSense Health Plan. Together, the plans cover about 3 million people in Massachusetts. Pellegrini discussed the last term in health care legislation, as insurers across Massachusetts warn that the system is at a breaking point, with hosts John McDonough of the T.H. Chan School of Public Health and Paul Hattis of the Lown Institute.
In the last minute crush of bills that made it out of the Legislature’s 2023-2024 session, lawmakers finished work on two health care bills right at the buzzer. These bills, signed into law by Gov. Maura Healey in early January, seek to lower health care costs, cap prescription drug costs at $25, improve access to primary care, and increase oversight of the health care industry.
“I was probably one of the few people who would say to my staff and say to our members, ‘A bill’s never dead until it’s dead,’” Pellegrini said. “And I sort of had a sneaking suspicion that this was going to happen. So we were prepared.”
Massachusetts has one of the highest standards for medical loss ratios, which is the proportion of premium revenues spent on clinical services and quality improvement. The Bay State requires 88 percent of individual and small groups premiums to be spent on health care services and 85 percent for large groups. The large group amount is in line with the Affordable Care Act standards, though the small group and individual metrics are higher than the federally required 80 percent.
This, Pellegrini argues, is one piece of Massachusetts’s approach to health care cost management that places the affordability issue “on the backs of carriers.” Health plans in Massachusetts, unlike other actors in the health care sector, have to explain and defend their rates and can have the proposed rate rejected if the profit margin is too high.
When the Deval Patrick administration in 2010 rejected a swath of proposed health care rate increases for that reason, the health plan appeals offered mixed results, according to an analysis from health care and life science law firm Epstein Becker Green. Using percentage increase was a flawed metric, the hearing boards concluded, and the high rates were technically sound.
“Today, most of my plans are losing money,” Pellegrini said. “They’ve lost money for several quarters. And you could argue, in theory, they’re actually not collecting enough in premiums, which is not a popular message.”
A provision in the health care bills gives the state Department of Insurance a stronger role in reviewing commercial health insurance contracts, considering both affordability but also whether the rates are sound.
“So I think much like 2010, you are going to find that while we don’t like the rates – they’re high – they are what are needed to support the underlying costs, which are provider costs and pharmaceutical costs,” Pellegrini said. The Legislature could, if it had the appetite, impose a default rate to avoid providers deciding to operate out of network to make more than the state-approved health plan rates.
The premiums reflect the industry cost drivers, she said, which is currently dominated by spending in hospitals for inpatient and outpatient care and in the pharmaceutical industry.
One aspect of the new law brings deeply controversial pharmacy benefit managers – middlemen known as PBMs – under the auspices of the state’s Health Policy Commission. This situates them alongside providers and health plans, Pellegrini explained, and requires them to provide data to the commission and incorporates them into cost trends hearings.
“I think there’s been a lot of finger-pointing between the PBMs and the pharmaceutical industry,” she said. “And I think letting the HPC sort of get under the hood to really understand those transactions and how it relates to list price, et cetera, will be super important.”
Other provisions establish an office of pharmaceutical policy and analysis, a primary care task force, and an office of health resource planning.
Planning is critical, Pellegrini said, to head off a crisis like the Steward bankruptcy that endangered community health centers across the state.
“My fear has been – and I think it’s played out – that when hospitals and others are looking to expand, they look at things that are going to be profitable to them and not necessarily what the community needs,” Pellegrini said. “Our state needs to do an inventory to understand what we need. God forbid that we ever face another Steward crisis, but I think it’s important to understand emergency room capacity, urgent care capacity, what we have for diagnostic testing in regions, and that we are promoting projects that are in the public interest and not just that are profitable to the players.”
For more with Lora Pellegrini – on prescription drug pricing, hospital accountability, and the future of the Affordable Care Act – listen to The Codcast on Apple Podcasts, Spotify, or wherever you listen to podcasts.
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