Health insurers file for steep rate increases
Photo | Courtesy of Chris Lisinski, State House News Service
The Massachusetts State House
Hundreds of thousands of small business employees and individuals could face significantly higher health insurance premiums next year under proposed rate increases that critics warn would add another crushing weight to employers and residents already struggling to manage high costs.
The Division of Insurance in the coming weeks will review 2026 merged market rates submitted by carriers, which average out to a 13.4% hike that's more than twice as large as the 4.8% growth regulators approved two years ago.
Insurers argue they have little choice but to raise rates in the face of growing costs charged by providers and the pharmaceutical industry, while small business leaders warned the hikes will saddle members with even more strain at a time when Massachusetts is becoming increasingly unaffordable.
Gov. Maura Healey, too, linked the merged market proposal to broader economic concerns.
"Health care costs, as reflected in the proposed rates filed by health insurers, are simply unsustainable. I directed our Insurance Commissioner to closely scrutinize these filings as part of the rate review process," Healey said in a statement to the News Service. "What is clear is that we all must do much more to lower the cost of health care in this state."
Eight major health insurance providers late last month submitted the proposed rates they want to charge next year in the merged market, which combines under one umbrella individual insurance and small group insurance for businesses with no more than 50 eligible employees.
The new annual weighted average base rates would all increase by varying amounts, with Fallon Community Health Plan's 9.9% the lowest and Boston Medical Center Health Plan's 16.2% the highest, according to DOI data.
Taken together, the proposals reflect an average increase of 13.4% affecting more than 720,000 renewing members, a sizable jump over the 8.36% growth regulators approved last year and the 4.8% growth in 2024.
Eileen McAnenny, president of the Employer Coalition on Health, said those hikes would be "very difficult for small businesses to absorb," especially as employers navigate high costs for energy and unemployment insurance as well as the prospect of tariffs.
"Those rate increases are alarming when considered in the context that Massachusetts already has the second-highest health insurance premiums in the nation," she said. "But unfortunately, I don't think it's surprising given that we set a cost growth benchmark each year that providers and drug companies blow through without consequence, and that we keep providing supplemental payments to providers and expecting nothing in return -- no improved efficiency, no transparency."
Retailers Association of Massachusetts President Jon Hurst said the "vast majority" of his group's 4,000 members would be affected by increases in the merged market premium rates.
"The average small business in the retail, small restaurant world has sales today equal to pre-COVID. Their sales are flat, but their costs are through the roof, primarily health insurance," Hurst said. "We've seen, over the last five years, an increasing number of dark storefronts. It's still continuing long past COVID because of these cost increases, and health insurance premiums are by far the biggest nut."
DOI will review each of the eight rate filings individually, and the department can reject proposals if it finds that the increases are "not reasonable in relation to health plan benefits, or if they are excessive or inadequate or use rating factors that are discriminatory or not actuarially sound," the department wrote in an advisory.
Last year, several carriers proposed rate increases larger than the versions that were ultimately approved.
DOI plans a virtual public hearing on June 17, where insurance carriers will present their proposals and others are invited to offer testimony, ahead of a final decision expected in August.
"We're going to tell them it's unaffordable, reject them. They can reject them," Hurst said. "Maybe the insurers need to go back to the drawing board and reopen these contract negotiations with hospitals and pharma companies."
The vast majority of the merged market rate increases would be driven by increasing medical and pharmacy claims, according to data insurers submitted to the state, with administrative costs, taxes and fees accounting for less than one-tenth of the total average hike.
Individual and small group health plans are required to spend 88% of premium dollars on health care services instead of administrative or other costs.
Insurers have long contended their hands are tied by high provider and prescription drug prices. Lora Pellegrini, president of the Massachusetts Association of Health Plans group that represents insurers, said carriers "are frustrated, too."
"Premiums reflect those underlying health care costs. We have seen rate demands from providers in the high double digits. We have one provider who's asked for a 70% increase in their rate. Plans can only do so much," Pellegrini said. "The power of providers who have only gotten bigger and bigger with consolidation make it very hard for health plans to negotiate a robust deal, because consumers want these hospital systems in their networks."
Pellegrini pointed to financial headaches at MassHealth and the Group Insurance Commission, the latter of which needed a $240 million funding injection to continue paying claims for its 460,000 public employee members through the end of the fiscal year.
"Private-sector health plans have those same challenges," she said.
Margins for private health insurers have been steadily declining. After peaking at 2.8% in 2020, the median private health insurer total margin dropped into the red in 2023 and fell again to -1.06% in 2024, according to data MAHP shared with the News Service.
Financial strain is rampant across the health care landscape. Total health care spending per capita in Massachusetts surged 8.6% from 2022 to 2023, more than twice the benchmark intended to represent a cost-containment goal. Watchdogs regularly warn about patients grappling with high premiums and medication costs.
The Division of Insurance has already flexed new authority to scrutinize health care costs. A market oversight law Healey signed in January tasked the office's regulators with determining whether proposed rates are "excessive" by considering "affordability for consumers and purchasers of health insurance products."
On March 12, the division issued regulatory guidance requiring insurance carriers to limit the growth of deductibles and copays to the rate of medical inflation, or roughly 4.8%.
"We are actively looking at other actions we can take to contain these health costs," Healey said. "Everyone has a role to play – insurers, hospitals, the pharmaceutical industry – and everyone will need to step up to make Massachusetts a more affordable place to live and do business."
Healey and the Legislature last term agreed on a hospital oversight and market review law and a measure intended to rein in prescription drug costs. While implementation of those laws unfolds, policymakers are weighing additional action to address what one top senator dubbed a health system that is "falling apart."
Asked how confident she is that Beacon Hill Democrats can navigate the thicket of competing interests to achieve additional reforms, McAnenny replied simply, "I hold out hope."
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