Health insurers on Tuesday defended the steep rate increases they have planned as an unfortunate but necessary response to rising pressure, seeking to pin the blame on care providers and the pharmaceutical industry.
At a regulatory hearing to unpack the higher rates that insurance carriers want to charge hundreds of thousands of small business and individual members in 2026, representatives from several of the health plans argued that they had little choice and themselves are struggling to find a stable financial footing.
“Unsustainable” was the common refrain used by Division of Insurance officials, small business industry groups, and insurers to describe the trend of pharmaceutical spending or the overall health care landscape.
The hearing captured the tension and complexity of reining in health care costs that are among the highest in the nation, as insurers, providers and prescription drug companies all point the finger at one another.
Candace Reddy, senior vice president of government and regulatory affairs for Blue Cross Blue Shield of Massachusetts, said the carrier’s average 12.9% proposed rate increase for the merged market “directly reflects the rapidly increasing cost of medical care and pharmacy services for our members.”
“As our rate filing implies, we are ensuring that we are accurately pricing our benefit plans to cover the cost of care for our members. This is difficult to do,” Reddy said. “We underestimated costs last year due to rapidly increasing trends, and reported the biggest operating loss in our history for 2024, $400 million. As a not-for-profit company, this is not sustainable.”
Like most other carriers in the merged market, the vast majority of Blue Cross Blue Shield’s proposal is driven by rising spending on care and on prescription drugs, according to data the insurer submitted to regulators.
Expected medical and pharmacy claims alone account for about 90% of the rate change, BCBSMA said in its submission to the state, with administrative costs, taxes and fees, contributions to surplus, profit and reserve, and benefits or cost sharing representing the remainder.
Reddy told regulators that several care systems with which the insurer negotiates are seeking price increases “far in excess of the cost growth benchmark set by the state,” referring to the 3.6% rate that is supposed to be a target for containing total care costs. Actual costs have smashed that mark several years in a row.
Andrew Lafortune, BCBSMA’s senior manager of commercial rate review, added that some providers requested rate increases “three to five times above” that benchmark.
Several insurers argued that health care system consolidation has been fueling the trend. As already-powerful providers expand and merge, insurers said, they gain more negotiating leverage to seek higher payments.
“We do not do this willingly, gladly. This is not happy news for us to file or defend,” said Paul Wingle, chief product officer of Boston Medical Center Health Plan, which is seeking an average merged market rate increase of 16.2% next year. “It’s done out of necessity.”
“We’re not [an] ‘any willing provider can come into our network’ kind of plan. We look for partnerships that share our view of affordability and access, and we are willing to walk away from providers who aren’t willing to join us in that mission, and we have done it,” he added. “Consolidation makes that harder.”
The pharmaceutical industry was again a target at Tuesday’s hearing.
Eileen McAnneny, president of the Employer Coalition on Health, pointed to state data showing a 10% year-over-year growth in pharmaceutical spending, arguing that those “astronomical increases are ultimately borne by the patients, consumers and employers who pay for the care.”
During a question-and-answer stretch with representatives from BCBSMA, Division of Insurance Deputy Commissioner Kevin Beagan said, “Pharmacy costs continue to rise at levels that are unsustainable. We see this across all the carriers.”
Providers and prescription drug manufacturers regularly defend their work — and what they charge for it — as necessary to provide quality care in Massachusetts, especially as medical needs shift and utilization rises.
Tuesday’s hearing kicked off as Gov. Maura Healey prepared to address the BIO International Convention, which brought together thousands of leaders and workers from the biotechnology and pharmaceutical industries that state government has supported for years with tax breaks and other support.
The Legislature and Healey agreed last year on new laws imposing additional oversight on hospital finances and implementing additional prescription drug price controls. The Senate has sought this term to further cap medication costs, drawing criticism from the pharmaceutical industry, whose leaders warned the proposal could stifle innovation and limit supply.
Regulators at DOI are partway through their analysis of the latest merged market rate proposals, which would affect more than 700,000 Bay Staters who get insurance as individuals or through a small employer. The proposed rate increases would build on an average 8.36% growth that regulators approved last year.
The department can reject any of the eight rate filings if officials deem them “not reasonable in relation to health plan benefits,” or if they conclude a proposal is “excessive or inadequate or use[s] rating factors that are discriminatory or not actuarially sound.”
DOI Commissioner Michael Caljouw said the review will continue “over the summer.” A final decision is expected in August.
“The division’s review is occurring at a time when health care costs are reaching unsustainable levels,” Caljouw said. “Health care is consuming an ever-increasing percentage of income for families and of budgets for businesses. There’s an urgent need for renewed focus on health care affordability in Massachusetts.”
Some business leaders want regulators to reject the proposals and require insurers to return with more affordable alternatives.
But attendees also said Tuesday that while the high rates could pose a challenge for consumers, they cannot be addressed in a vacuum.
“Health care costs that are driving these premium increases will not be solved by the rate review process alone or by one industry alone,” said Alex Sheff, senior director of policy and government relations at Health Care for All. “It will require changes that address not just insurance carriers, but rising prescription drug prices as well as prices at the highest-cost hospitals and health systems. It will require all stakeholders to come together around reforms.”
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