Aftermath: Policies and Procedures following the Blue Cross Blue Shield of Massachusetts DOI Rate Settlement
As you read in our last post. Blue Cross Blue Shield of Massachusetts has settled with the Massachusetts Division of Insurance. They’ve agreed on new rates they can charge their policy holders who renewed on 4/1/10 through the present day – http://bit.ly/adztWw. If you renewed this year anytime after 4/1/10 you’ll most likely be affected by this with higher premiums moving forward.
I’ve since spoken to reps at Blue Cross to find out how this will affect our clients currently with Blue Cross with renewal dates in the affected time period. They’ve given me specific directions which I would like to share in today’s blog post.
Essentially, they’ve broken down their policies and procedures into three different groups:
- April 1 , 2010 – July 31, 2010 Renewals
- August 1, 2010 - August 31, 2010 Renewals
- September 1 – Present Day Renewals
April 1 , 2010 – July 31, 2010 Renewals
Blue Cross has made this group the first priority in communicating new medical insurance rates. They’re currently working on calculating rates for all groups with renewals in this time period and are aiming to get them out the door by Wednesday, 8/18/10. These rates will go into effect on 9/1/2010. Once a group has received their new rates, they’ll have 60 days to decide if they’d like to switch plan designs within Blue Cross. If the group decides to make a plan design switch, Blue Cross will implement the changes 30 days from the decision date.
Examples:
If you’re renewal date was anywhere between 4/1/10 and 7/31/10, you can expect to receive your new rates on 8/18/2010 which will become effective as of 9/1/2010. (Since you’re September bill will most likely have already been generated by then, a retroactive adjustment including the additional premium for September should be expected on your October bill. The September invoice should be paid as billed).
You’ll have 60 days from the date you found out (if its 8/18/10 as Blue Cross has projected you’ll have until 10/17/10 to decide if your company will make a plan design change within Blue Cross). If you decide anytime within this 60 day period to make a change, that change won’t become effective until 30 days after the request. A few scenarios:
- If the group decides to make a plan design change on the day it finds out what it’s new rates are (8/18/10 in this example) the change won’t become effective until 9/17/10 (30 days). Since the new rates for your old plan become effective on 9/1/10, the group would have to pay the higher rate for this coverage through the new effective date of 9/17/10.
- If the group chooses to wait until the last possible date to make a switch (10/17/10 in this example), that change won’t become effective until 11/16/10 resulting in your group being billed at the higher new rate for the old plan through 11/16/10.
- If the group decides to not make a change in plan design, nothing needs to be done on the carrier end. You may just want to contact your payroll vendor if you’re planning to adjust employee withholdings to maintain an agreed upon employer/employee cost share percentage.
In all cases, you’re anniversary date will remain the same and Blue Cross will not retroactively bill back past September 1, 2010 for any lost premiums during the April – July months of lower interim rates.
August 1, 2010 – August 31, 2010 Renewals
As the groups that renewed their medical insurance in April, May, June and July are scheduled to receive their premium increases relatively soon as mentioned above; groups that renew in the month of August actually won’t receive their premium increases until sometime in the first two weeks of September. These rates will go into effect on 9/1/2010 however. Once a group has received their new rates, they’ll have 60 days to decide if they’d like to switch plan designs within Blue Cross. If the group decides to make a plan design switch, Blue Cross will implement the changes 30 days from the decision date.
Examples:
If you’re renewal date was 8/1/2010, you can expect to receive your new rates sometime between 9/1/2010 – 9/14/2010. These rates will become effective as of 9/1/2010. (Since you’re September bill will have already been generated and most likely paid by then, a retroactive adjustment including the additional premium for September should be expected on your October bill. The September invoice should be paid as billed).
You’ll have 60 days from the date you found out what your new medical insurance rates are to decide if your company will make a plan design change within Blue Cross. For example, if your group finds out about its premiums on 9/14/10, you’ll have until 11/13/10 to make a plan design switch. If you decide anytime within this 60 day period to make a change, that change won’t become effective until 30 days after the request. A few scenarios:
- If the group decides to make a plan design change on the day it finds out what it’s new rates are (we’ll use 9/14/10 on this example) the change won’t become effective until 10/14/10 (30 days). Since the new rates for your old plan become effective on 9/1/10, the group would have to pay the higher rate for this coverage through the new effective date of 10/14/10.
- If the group chooses to wait until the last possible date to make a switch (11/13/10 in this example), that change won’t become effective until 12/13/10 resulting in your group being billed at the higher new rate for the old plan through 12/13/10.
- If the group decides to not make a change in plan design, nothing needs to be done on the carrier end. You may just want to contact your payroll vendor if you’re planning to adjust employee withholdings to maintain an agreed upon employer/employee cost share percentage.
In all cases, you’re anniversary date will remain the same and Blue Cross will not retroactively bill back past September 1, 2010 for any lost premiums during the April – July months of lower interim rates.
September 1, 2010 – Present Day Renewals
As of today, rates for 9/1/10 medical insurance renewals and later are updated in the system and available for viewing. You should consult your broker to find out what these updated rates are so they can help you make a decision on whether or not to switch plan designs within the carrier.
You should also consider other insurance companies at this time the same way you would during a normal renewal. Keep in mind that all carriers require that all applications, enrollment forms and payment be submitted 30 days in advance of the proposed Effective date. Since we’re already past the 30 day window for 9/1/10, it would still makes sense to look at the other carriers because their new business rates will remain the same throughout the month of September. So even if the effective date ends up being later in the month, this shouldn’t have an effect on the rates (just the Effective Date). This gives groups approximately 13 days to gather quotes, make decisions and submit paperwork before the end of the month. 13 days gets you to September 25th (generally the last possible September Effective date for most carriers).
I’m planning to post similar policies and procedures for the other major health insurers as soon as I can. If you have any questions on any of this or if you have a related question that we didn’t answer in this post, please don’t hesitate to reach out as we’re happy to be a resource for you.
Ryan P. McDermott
Ceasefire between the Insurance Companies and the Massachusetts Division of Insurance?
As many of you have probably read, all of the major carriers in Massachusetts have settled with the Division of Insurance on medical insurance rates with the most recent settlement coming this past week with Blue Cross Blue Shield of Massachusetts, the State’s largest medical insurer. If you haven’t been following this, check out these Boston Globe articles highlighting each of the three major carriers rate dispute settlements:
- Blue Cross Blue Shield of Massachusetts – http://bit.ly/adztWw
- Tufts Health Plan - http://bit.ly/bZLSsX
- Harvard Pilgrim Health Care – http://bit.ly/ca4Fcc
The settlements have solved some short term issues for the carriers in that they were able to increase their rates somewhat to keep up with the increased costs for services they claim their members rack up at high cost providers. Small employers, while having their rates increased slightly (anywhere from .5% – 12 % amongst all major carriers) avoided the colossal increases that were mentioned back in January (well over 25% in some cases). And with the current legislation on the Governor’s desk (awaiting signature) touted to be a major step towards containing long term healthcare costs (Here’s an article summarizing it – http://bit.ly/bf4Ers) should we be celebrating that we’re out of the dark with healthcare concerns in Massachusetts? I say far from it.
My prediction is that this cease fire we’re seeing between the insurance companies and the Division of Insurance is about as temporary as a ceasefire between the two spies in the famous Mad Magazine comic strip Spy vs. Spy. We’ll see a major change in the Massachusetts health insurance landscape in the coming months and years with the current legislation awaiting signature alone. (I’ve read through this bill a few times and will dedicate an entire post to it soon.)
In the end there will likely be material changes to employee benefits and it’s important for employers to track this. Follow our blog, tweet with us, friend us on Facebook and/or connect with me on Linkedin below to get the latest news along with our advice on best practices:
The technical aspect of this post deals with the aftermath of the settlements. If you had a medical insurance renewal anytime after 4/1/2010, you’re rates will most likely change in the next month (if they haven’t changed allready). If you don’t know what your rates are changing to, this week should be the week you find out so you can begin to execute your game plan.
Hopefully, you used some sort of metric at renewal where you either began to bank savings for a projected rate increase or used that projection to pass on a higher premium share to your employees. You’ll be happy to know that all of the carriers, while increasing their premiums moving forward, will not be retroactively charging back for the months of lost premium increases. So if you were banking money all this time, you won’t have to spend this on retroactive premium increases and can deploy the savings elsewhere. If you passed on premium increases to the employees and in turn saved money on the companies health care outlay, you can now calculate how much you saved and either bonus the money to your employees in some way or use the savings you received to not increase the premium share any further with the rate increase.
While this news requires technical analysis and financial changes this should also be used as an opportunity to communicate with your employee on their benefits by giving them some background on what’s been happening and how you’ve done your due diligence to make wise and well thoughtout decisions on behalf of their corporate benefits. Rely on your broker and/or representatives from your Insurance company for assistance in this regard. Invite them in to make presentations along side management or at least help you draft communications to your employees. By educating the employees and answering the questions they have honestly and completely, they’ll not only gain clarity on any uncertaininties they’ve had from following this in the news themselves, but they’ll also feel that the company is doing everything in it’s power to make wise benefits decisions while engaging them in the process.
These next few years could prove to be particularly challenging with contentious health care reform at both the state and national level. Employee Benefits and group medical insurance, as I said, will likely experience drastic changes and employee communication will become more and more important in maintaining morale as changes are implemented.
If you have any questions on what’s happening or would like to bounce an idea off of us, please feel free to consider us a resource by reaching out or connecting with us.
Harvard Pilgrim Press Release on MA DOI Rate Dispute
It looks like Harvard Pilgrim will be raising premiums moving forward but will NOT retroactively bill for April, May and June. Full press release here – Harvard Pilgrim MA DOI Rate Dispute 070210
Massachusetts Rate Cap Update
Good afternoon! I’d like to provide an update for everyone on the current battle between Massachusetts Health Insurance Companies and the Commonwealth’s Division of Insurance on rate approvals and disapprovals while giving small business employers some practical advice and well thought out strategy on how to move forward. But first I’d like to give the back story of how we got to capped rates and why I’m blogging about it today.
In the first quarter of 2010 our Attorney General, Martha Coakley, and her staff were tasked with the job of analyzing what was causing higher than normal rate increases in the past few years for Massachusetts businesses. She and her office completed their analysis and released a report. Here are a few quotes that do a great job summarizing their findings:
”price increases from providers caused most of the increases in health care costs in Massachusetts in recent years, and that prices were correlated to the market heft of providers.”
(Taken from The Telegram & Gazette – http://bit.ly/dlUA0k – in a great article that was printed leading up to the Governor encouraging the Division of Insurance to apply pressure to the insurance companies on behalf of small businesses).
“Prices paid by health insurance companies to hospitals and physician groups vary significantly within the same geographic area and amongst providers offering similar levels of service.”
(Taken from a press release on the Attorney General’s website highlighting the major findings of the report with a link to the full report – http://bit.ly/dbjCU4
While this was going on in January and February, April rates for small businesses were released to brokers and small businesses for review. These rates were higher than usual (even for Massachusetts) with some as high as 30%+. Governor Patrick reacted to this by encouraging the Division of Insurance to use their power to disapprove the rates and mandate caps on insurance companies on behalf of small businesses.
On April 1st, the Division of Insurance disapproved most of the rates submitted for approval for the second quarter (including April 1st rates) for being too high. Here’s a link to the story from the Boston Business Journal:
The insurance companies attempted to get an injunction from a judge to be able to sell their policies at the denied rates until this could all be settled in court. The judge denied the injunction and advised them to follow a defined appeals process. That process is underway and I am awaiting the results.
The insurance companies were also advised to work with their provider counterparts on ways to reduce cost in the system thus bringing down the overall cost of healthcare and eventually premiums. Many of the carriers began meeting with providers to start the negotiations process for contract renewals.
Not long after this process began, I received brokerage updates from most of the major carriers on their progress in these negotiations. Here’s an excerpt of one such update from Blue Cross Blue Shield of Massachusetts:
We feel strongly that all stakeholders must work together to create a solution that improves health care affordability. Blue Cross Blue Shield of Massachusetts will continue to be a leader in this process, but we know that success requires a reduction in medical cost trends. Shared accountability between the government, health plans, and providers is required to achieve more affordable health care.
We started this dialogue with health care providers, recognizing the urgency of addressing contractual payment terms. We look forward to working with them on positive solutions to the affordability challenge. However, we understand that there may be some providers who decide not to participate with us at rates that we believe are fair and reasonable, and are needed by the market.
The last sentence is extremely telling to me as it seems to be a very subtle and polite way of letting us know that if the rates from their contracted providers don’t come down in contract negotiations, than we can expect their HMO networks to shrink to only those providers that meet the cost structure mandated on them by the Division of Insurance.
What does this mean for small businesses in Massachusetts (companies with less than 50 employees)? At the moment, while these mandated rate caps are being used, the rate increases from 4/1/10 and on will be relatively minor compared to years past because the carriers are required to use their 2009 rates for these 2010 renewals. Assuming the census of any given company hasn’t changed drastically, there would only be a minor rate increase for age (since everyone would be a year older).
While this sounds fine and appears to be a victory for small businesses, the battle between the insurance companies and the Division of Insurance is far from over. These flat rate increases that small businesses are receiving for their renewals should be considered interim and likely to change. As I mentioned, the insurance companies are appealing the rate caps and have advised the brokerage community that they’ll do everything within their power to negotiate for higher premiums which could result in a retroactive chargeback sometime in the next 12 months. If not planned for, this could hurt a lot of companies from a budgeting standpoint.
In fact, both Harvard Pilgrim and Neighborhood Health Plan have already been successful in having their capped rates adjusted. Neighborhood negotiated for higher rates but were still below what they originally asked for. They’ve also agreed not to retroactively chargeback their groups (Article on Neighborhood Health Plan from their website – http://bit.ly/dlAsFG ) for the lost premium for the months of April, May and June. Harvard Pilgrim had their rates entirely reversed and has yet to decide if they’ll retroactively chargeback for lost premiums (Article from the Boston Globe – http://bit.ly/8Xq0Pm). But both will certainly be raising premiums on groups to the original levels moving forward.
Since this whole issue began, I’ve received alot of phone calls from existing prospective clients for practical advice on how to andle this issue. So I figured I’d blog about it and provide few potential approaches that Small Businesses can use to eliminate major effects to the P & L while maintaing and possibly even improving employee morale.
In this regard, my advice to small businesses is to approach renewals conservatively while this appeals process is going on by adjusting the employees cost share percentage higher for the interim rates that you’re currently paying or renewing at. As the employer, you’ll be paying the lower interim premiums for the time being and therefore would enjoy some interim savings. You’ll want to bank those savings so that you’ll be able to react to whatever is decided in court over the next few months with your given carrier.
In the worst case scenario where the insurance companies win out (and it looks like they will win based on the Harvard Pilgrim decision) and are able to retroactively charge back their groups, you can use the savings to pay the retroactive charge backs and the employees will not have any change to their out of pocket costs. In the best case scenario where premiums remain at the capped rates, the savings could be reimbursed back to the employees through a change in premium share (or in some other way) or retained/diverted by the company for some other expense.
The last thing you’d want to do is lower the employees out of pocket cost now, get hit with the chargeback a few months later, than be forced to raise they’re out of pocket costs significantly at an unexpected time.
If you decide to keep the employee cost share percentage the same through all the changes in rates, you’ll technically end up in the same place in the end. You just want to make sure the employees are kept up to date and informed on a regular basis as to what’s happening with the legal battle between the State and the Insurance companies so they aren’t shocked if their costs increase later. In my experience, I tend to find that employees can be forgetful when it comes to benefits. (I create the language and draft these communications for our clients when requested).
Questions for readers:
- How have you handled this issue?
- If the rates go up to the originally intended levels, will you be forced to move to a plan with a less inclusive plan design with lower premiums?
- Have your employees been following this and have they had questions?
Special Elections, Healthcare Reform, Status Updates and the Zen Master
Like most people in Massachusetts with a Facebook page, my wall has been exploding with status updates from residents and non residents representing all sides of politics and health care reform. In my office, I have a photo of Mookie Wilson running up the first base line as the ball goes through Billy Buckner’s legs (autographed by both Wilson and Buckner). As many of you know, this led to a New York Mets 1986 World Series victory a game later (no offense Boston fans, my team has been down for a long time hence my having to hold onto a memory over 20 years old). For me, this picture has always served as reminder that anything can happen. I sometimes forget this but was reminded again with Scott Brown’s special election victory. 
People in my line of work (Employee Benefits Consulting, Medical Insurance Brokerage) are generally republicans. If they’re independent, they lean republican and if they’re democrats they’ll vote with republicans on health care. I’m sure there are exceptions but for the most part this is what I’ve found to be the case. I do fall into one of these categories and was happy to see a Scott Brown victory and I mostly agree with his general thoughts on health care (taken from his website):
I believe that all Americans deserve health care coverage, but I am opposed to the health care legislation that is under consideration in Congress and will vote against it. It will raise taxes, increase government spending and lower the quality of care, especially for elders on Medicare. I support strengthening the existing private market system with policies that will drive down costs and make it easier for people to purchase affordable insurance.
On the other hand, as I listen to the news this morning, skim the articles and read status updates I can’t help but be reminded of the Zen Master quote from the movie Charlie Wilson’s War (delivered by Philip Seymour Hoffman):
“A boy is given a horse on his 14th birthday. Everyone in the village says, “Oh how wonderful.” But a Zen master who lives in the village says, “we shall see.” The boy falls off the horse and breaks his foot. Everyone in the village says, “Oh how awful.” The Zen master says, “We shall see.” The village is thrown into war and all the young men have to go to war. But, because of the broken foot, the boy stays behind. Everyone says, “Oh, how wonderful.” The Zen master says, “We shall see.”
Health care still dominates our GDP. We still spend a disproportionate amount of money on end of life care. Employers are still facing rate increases way over inflation. Not all citizens are insured and our insured citizens are mostly uncompetitive consumers because of lack of transparency. Emergency rooms are still bleeding hospitals. And the list goes on and on.
We still have a health care problem in this country.
“I support strengthening the existing private market system with policies that will drive down costs and make it easier for people to purchase affordable insurance.”
I really hope this is the case for the sake of our clients and that well thought out health care reform doesn’t go by the wayside. McDermott & Thomas Associates tracks health care news, occurrences, trends and best practices regularly. We make a serious effort to look at health care from all sides of the political and industry spectrum amongst other things. We do this as part of an endless effort of education and professional improvement so that we can ensure quality service and expertise to our clients. I encourage you to stay connected with us moving forward as we’re happy to be a resource on these and other topics related to health care, employee benefits and financial services. Connect with us here:
http://www.tinyurl.com/mthfacebook
http://www.tinyurl.com/mthlinkedin
http://www.twitter.com/mthassociates
On a lighter note, the following are status updates, tweets, etc. that I’ve seen since Scott Brown was declared the winner of last night’s election. No names are attached to these updates for privacy purposes. They clearly cover just about every opinion out there and some of them are quite humorous. Let me know which one you like the best! Feel free to add your own in the comments section.
- yay!!!! scott brown won!!!!!!!!!
- We got beat. We’ll be back. One day at a time.
- Happy Almost-Anniversary, Mr President!
- Great Scott! 2010 Boston Tea Pahty (“Party” incorrectly spelled presumably to accentuate the posters Boston accent)
- I totally support giving the whole thing back to Her Majesty.
- BOSTON (AP) — Republican Scott Brown wins Massachusetts Senate seat previously held by Kennedy.
- As Martin Sheen said in Wall Street “Well I guess if you live long enough you’ll see everything and I do mean everything”
- is in love with Ayla Brown
- I know this guy who can get you a kidney, cheap. You have to put it in yourself though.
- Congrats Senator Brown…fellow Dems and like minded folks let’s take notes and move forward…
- that’s cool, Mass. It’s not like we were doing anything useful with that supermajority.
- Martha Coakley gets the mollywhop…
- can’t believe Ted Kennedy’s seat will go to Scott Brown – so sad
- this country is doomed.
- Mass-holes
- Deleting more “friends” who discuss politics on their Facebook status. Get a life, people…if you wanna make a difference, go out and do it, don’t bitch about it on the internet.
- it is poetic justice that Scott Brown won Kennedy’s seat!!!
- booze didn’t even numb the pain tonight I’m going to sleep.
- Congratulations Scott Brown! 
- I ponder Canada sometimes.
- Aw, come on, who needs healthcare? I’m slowly rebuilding myself with robot parts.
- Election over = phone stops ringing
- Frankly, doesn’t give a damn.
- Looking at the “RED” and “BLUE” voting map of Massachusetts I can’t help but think that the rumors of how certain places vote based on sterotypical BS has been dispelled! GO 413!!!!
- “What am I supposed to do …shake people’s hands in the cold….at Fenway Park??” I’m so glad you felt that way Martha!!
- can’t we all just get along?
Ryan P. McDermott
Funny video on why you should own life insurance – http://tinyurl.com/ycf6wt7
Health Care Reform: Yes or No? (Video Footage)
Here’s a link to the actual video footage from the Staten Island Advance editorial board meeting that McDermott & Thomas Associates President Patrick McDermott took part in along with Rep. Michael McMahon and other community leaders:
http://videos.silive.com/staten-island%20advance/2009/08/staten_island_advance_editoria_4.html
(Mr. McDermott’s segment starts at 6:15)
In the first 15 minutes of the video footage, Rep. McMahon takes questions on everything from drug companies to medicare spending as well as reducing utilization without losing quality outcomes. The remaining 12 minutes or so, he’s asked about the politics behind the bill. McMahon talks about how he thinks there are both good and bad merits to the bill but overall he feels it’s trying to do too much too quickly without enough effort in educating the American public as to why reform is so important.
Let us know what you think!
Health Care Reform: Yes or No?
Check out the following article. It’s an interesting one in that it displays how a Democratic Congressman from a mostly Republican district is struggling with whether or not he can support the current Health Care bills as they read now.
The article stems from an editorial board meeting held by local Staten Island newspaper, the Staten Island Advance, where Rep. Michael McMahon and other prominent Staten Island community leaders took part in a discussion on health care. Many different views, ideas and opinions were discussed which are highlighted in the article. Our President, Patrick McDermott, participated in the meeting and is quoted in a few places.
http://www.silive.com/news/index.ssf/2009/08/staten_islands_mcmahon_in_heal.html
His picture is the fourth down.
August HR Insider – Great info on how Medical Insurance plan design can result in Healthy Lifestyles for your employees. Also some info on HealthCare Reform – http://ping.fm/vrSI9
Health Care Reform, Advocacy and our Involvement
The future of Health Care is upon us. With daily discussion on multiple bills being negotiated on Capitol Hill and publically discussed amongst several mediums and forums, the team at McDermott and Thomas have been playing close attention.
In fact, our Founder and President, Patrick McDermott, has been playing an active role in advocacy participating in the National Association of Health Underwriters fly-in on Capitol Hill this past July. More than 1,000 professional health insurance advisors, agents, brokers, consultants and employee benefit specialists from 49 states met with nearly 400 Senate and House offices as part of the effort.
As the House and Senate actively debate comprehensive health care reform legislation, this joint grassroots fly‐in was designed to provide an opportunity for the health insurance agent and broker community to send a strong message to Congress to preserve the private delivery of health insurance and to oppose the creation of a government‐run public plan.
Mr. McDermott met with several New York based Congressmen including Rep. Michael McMahon (D-New York) and the legislative staff for Senator Kirsten Gillibrand (D-New York). In his meetings, he was able to reference the unintended consequences of a public plan not only from the standpoint of the insurance advisor but also also how it could negatively affect providers from his expereince as Chairman of Staten Island University Hospital and his board work at the North Shore Long Island Jewish Hospital System.
Additionally, later this month, Mr. McDermott will participate in a Staten Island Advance editorial board meeting with Rep. McMahon and other prominent Staten Island community leaders to discuss health care. He’s also been invited to a dinner with New York City Mayor Michael Bloomberg at the end of August to discuss Staten Island issues related to business, community and health care.
Stay tuned to this blog to read about the outcomes of these meetings as well as other news related to health care and employee benefits.
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McDermott & Thomas Associates is a firm specializing in Employee Benefit Planning, Insurance Planning, Retirement Planning, Payroll and Human Resource Outsourcing. The company was established in 1980 and has offices in Boston, MA, Princeton, NJ and Staten Island, NY. The firm insures clients primarily located in the North East with a specialization in assisting companies that are newly Incorporated and/or expanding into the United States for the first time.
