Maryland Insurance Costs Rise Despite Hospital Price Controls
The apparent inability of provider price controls to limit insurance costs runs counter to a central argument behind national calls for single-payer plans.
July 24—Despite a unique price control system for Maryland hospitals, insurers in the state’s Affordable Care Act (ACA) individual health insurance market have requested the largest average rate increase in the country.
Maryland insurers have requested an average 2019 premium increase of 29.45 percent, according to tracking by acasignups.org. That was the largest average premium increase identified in any state that is followed by the pro-ACA national tracking website.
The 2019 request followed a 33 percent average premium increase that was approved for 2018 plans. That average approved rate was lower than the increase, 43.1 percent, that was originally requested last year by the state’s insurers.
The rate increases come in a state that in 2014 shifted its hospital payment structure to an all-payer, annual global hospital budget that encompasses inpatient and outpatient hospital services. The Maryland Health Services Cost Review Commission sets hospital rates for all insurers in the state.
Asked about the possible disconnect between insurance rate increases and state price controls for hospitals, a Maryland insurance regulator said the rate increases were tied to enrollees, rather than providers.
“I think it has to do with the people in the [individual-insurance market] pool who have certain health conditions, certain experience,” Robert Morrow, associate commissioner for the Maryland Insurance Administration, said in an interview. “Everything is driven by the experience of the people in the pool.”
Maryland also has seen its ACA marketplace pool shrink, he said.
“As the prices have gone up and up over the last few years, people have left the pool for whatever reason—‘I can’t afford it’ or ‘I’m now employed,’” Morrow said in reference to a 116 percent cumulative increase in average ACA marketplace premiums since the marketplace launched in 2014. “When the pool gets smaller, then the people who stay are those who are really sick.”
Morrow said the state’s price controls also may have little effect because they were limited to hospitals instead of applying to all providers.
“All that cost controls are is what is paid to a hospital for certain services—it’s [only] hospitals,” Morrow said.
State regulators have given similar explanations to Mike Robbins, senior vice president for rate setting at the Maryland Hospital Association (MHA), when he has asked about the disconnect.
Although it comprises about 40 percent of the insurance premium dollar, hospital spending has stayed at or below inflation (between 2 percent and 2.5 percent annually) since the all-payer waiver went into effect in 2015, Robbins said in an interview.
“That’s why we have questioned these large increases in the individual market,” Robbins said.
Meanwhile, Maryland’s increase in hospital spending has been limited in part because of coverage expansions that have cut the state’s overall uncompensated-care rates from 7 percent to about 4.25 percent.
“That has helped to mitigate the growth in hospital costs in Maryland because we build the cost of uncompensated care into our rates in the hospital rate-setting system,” Robbins said.
National healthcare policy advisers have consistently blamed steep annual increases in provider rates for increasing health insurance prices.
“When you look at other countries, our utilization is not that much greater, and in fact, is lower in some areas,” said Sara Collins, PhD, vice president of healthcare coverage and access for The Commonwealth Fund. “But the prices for providers—physicians, hospitals—and prescription drug prices are what’s driving” insurance costs.
The Maryland experience also may run counter to the belief of some policymakers that allowing increased consolidation may reduce premiums by bolstering the bargaining power of the remaining insurance companies. As the individual market’s premium increases over a multiyear span ran into the triple digits, the number of insurers selling plans in Maryland’s individual market shrunk from seven in 2014 to two for 2019.
Those remaining insurers, meanwhile, have reported “significant financial losses” in their individual-market plans, which they must subsidize with revenue from the plans they sell in the small- and large-group markets, Robbins said.
The situation in Maryland may provide context to the increasing political pressure for national price controls to bring down insurance costs. And some have hailed Maryland’s price-control approach as a potential model for limiting provider payment to Medicare rates. Such price controls would theoretically reduce the projected cost of a Medicare-for-all type of national approach.
Collins said various single-payer options under consideration in Congress would include setting provider rates that represent some share of what Medicare pays providers or that fall between what Medicare and commercial insurers pay.
But Brian Webb, an assistant director for the National Association of Insurance Commissioners (NAIC), warned that even controlling unit prices for providers—such as by limiting their payments to a share of Medicare payments—wouldn’t control overall healthcare costs without controls on utilization.
“Who’s going to do utilization review to make sure they are not just increasing their units [in a single-payer system]?” Webb said in an interview. “We’ve seen that in the past where the carrier comes in and says, ‘I’m going to really ratchet down costs for that.’ Well, the provider says, ‘I’m just going to really ratchet up the number of people I do.’”
Support for Medicare rate-based provider price controls generally has been limited in Congress to Democrats, but some see signs that Republicans are beginning to warm to such an approach.
Melinda Beeuwkes Buntin, PhD, professor and chair of the Department of Health Policy at
Vanderbilt University, said at a recent Washington, D.C., healthcare policy event that some Republican senators have voiced support for using Medicare as a reference in some circumstances.
For instance, some legislators have discussed allowing insurers that provide coverage in rural areas—where insurance options are limited or nonexistent—to limit their provider payments to a certain share of Medicare rates, Beeuwkes Buntin said.
Robbins doubted that federal policymakers would be willing to replicate the Maryland hospital rate-setting system nationwide because it provides higher Medicare and Medicaid rates in exchange for lower commercial rates.
“That part of our model it’s hard to say can be duplicated,” Robbins said.
However, policymakers may have more success using global hospital budgets to incentivize hospitals and their provider partners to reduce avoidable utilization—like unnecessary emergency department use—he said.
Less ambitious versions of the Medicare-based rate-setting approach include a growing number of state plans to tie provider rates in cases of out-of-network billing to a share of Medicare rates, Webb said.
Meanwhile, in the individual market nationally, premium increases appear smaller for 2019 compared to 2018, Webb said. Those somewhat smaller increases have come amid an increase in the number of plans being sold in some markets—following national declines each year since 2015.
America’s Health Insurance Plan have identified new insurers entering individual markets in 12 states for 2019.
However, it is not yet clear whether the increased competition is the cause of the relatively smaller premium hikes.
Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare