Massachusetts: high prices in a managed care stronghold - includes related information on reform legislation

Business & Health, Oct, 1995 by Dan Wise

Other players becoming more active in the market-place include U.S. Healthcare, a successful for-profit national HMO which has had a modest presence in Massachusetts but recorded impressive membership gains in the past year. Healthsource, Inc., a for-profit HMO headquartered in neighboring New Hampshire but with operations in 14 states, is awaiting regulatory approval to acquire a Worcester-based HMO, Central Massachusetts Health Care. United HealthCare's recent acquisition of MetraHealth, an indemnity health insurer with more than 200,000 members in Massachusetts, may also affect the state market. If the new company can convert a sizable number of its Bay State subscribers to an HMO product, "it can become a significant player," says Robert Hughes, president of the Massachusetts Association of HMOs.

Amid the flurry of activity, Alice Rosenblatt of Coopers & Lybrand says it is incumbent on purchasers to keep up the pressure for cost containment. Comparing Massachusetts' cost structure to other states with widespread managed care, she says, makes it clear that there is still plenty of fat to be cut. In the face of continued consolidation by providers and plans, she advises, "Maintain your leverage."

Reform at a glance

Employer mandate--A much-postponed 1988 law requiring companies with more than five employees to provide health insurance or deposit $1,680 per employee into a state fund for coverage, slated to take effect January 1. Republican Gov. Weld has sought to repeal the provision but the Democratic-dominated legislature has held up repeal efforts in an attempt to bargain for universal coverage. Legislative leaders do not expect the law to be implemented.

Medicaid--Mandatory managed care for most non-elderly recipients, in effect since 1991, covers 450,000 out of 650,000 total recipients through HMOs or a state-run network of primary care physicians. HCFA has approved a waiver that would enable the state to use $231 million now set aside for hospitals that provide uncompensated care, to subsidize insurance for low-income workers, which also would be paid for with premium subsidies and tax credits. The state estimates an additional 200,000 low-income workers and their families would be covered. The plan must be approved by the state legislature.

The following measures are also included in the legislative package:

Medical savings accounts--A measure allowing insured individuals to defer state income taxes on up to $2,500 annually for the payment of health expenses.

Small market reform--Individuals and companies with 50 or fewer employees would be guaranteed coverage or renewal of policies with no pre-existing condition exclusions. Limits on variation in pricing would be imposed.

Antitrust--Hospitals would be allowed to create alliances and affiliations to eliminate or reduce unnecessary duplication of services.

Workers' compensation--A comprehensive reform law enacted in 1991 implemented antifraud provisions and streamlined processing, which has eliminated a backlog of 10,000 cases and reduced new ones by 18 percent. Utilization review and treatment guidelines also have reduced unnecessary medical treatment. Workers' compensation insurance rates have declined 26 percent since 1993, saving state employers an estimated $500 million, the state Labor Department reports.