For Immediate Release - April 24, 2013

AG Coakley Releases Third Report Examining Efforts to Control Rising Health Care Costs

Report Finds Consumers Increasingly Engaged in Decisions to Control Costs with Improved Transparency in New Health Plan Offerings; AG Recommends Ways for Regulators to Monitor and Address Ongoing Market Dysfunctions

BOSTON – Employers and consumers are increasingly enrolling in health insurance products that offer tiered or limited networks, showing that consumers are making decisions that engage them in efforts to reduce their health care costs, according to a report issued today by Attorney General Martha Coakley’s office. 

The report, however, warns that health plans continue to pay providers a wide range of amounts for comparable services and providers are increasingly aligning in ways that may cloud efforts to move toward a more efficient health care system. The report recommends greater scrutiny and transparency to protect lower-cost providers and maintain consumer options.  In addition, the report cautions that efforts to offer incentives to consumers to choose providers based on quality and efficiency may sometimes conflict with provider incentives under contracts that require them to manage patient care under a global budget. 

This is the third major report on health care cost trends and cost drivers by the AG’s Office. Over the past three years, the Attorney General’s Health Care Division has conducted an extensive review of never before obtained data from Massachusetts health insurers and providers. In two prior reports in 2010 and 2011, the AG’s Office showed how increased health care costs were tied to market clout rather than the value of services provided.

“Addressing health care costs while preserving quality and access is a priority for our office, as the Commonwealth continues to face significant challenges,” AG Coakley said. “Our investigation shines a light on the positive benefits of new health care products that focus on both quality service and affordability, but also demonstrates the need for greater transparency to address continued market dysfunctions.”

The AG Office's findings are based on information received from major Massachusetts health insurers and providers pursuant to a 2008 law enacted to promote cost containment, transparency, and efficiency in the delivery of quality health care. This year’s six key findings include:

  1. Employers and individual health care purchasers have increasingly moved toward health insurance products with tiered networks and high deductibles, and moved away from HMO products that restrict referrals through a primary care gatekeeper.
  2. Purchaser enrollment trends have significant implications for health plans designing products and providers managing risk contracts.
  3. Health plans continue to pay providers a range of amounts under traditional “fee for service” arrangements and global payment arrangements to care for patients of comparable health.
  4. Health plan product designs affect risk selection, total medical spending, and care management.
  5. Providers are taking on increased insurance risk without consistent mitigation by health plans.
  6. Provider consolidation and alignments have significant market implications that should be carefully reviewed, particularly where proposed consolidations may reduce access to lower-cost options for consumers and undermine efforts to promote value-based decisions by purchasers.

In the report, AG Coakley makes five recommendations to track and monitor the consequences of current health care market trends, including:

  1. The Health Policy Commission (HPC) and Center for Health Information and Analysis (CHIA) should require sufficiently detailed information about operations and finances across all books of business to support other key regulatory functions.
  2. In assessing the cost and market impact of proposed provider alignments, HPC should consider proposed changes in contract prices, any expected changes in referral patterns, market share, and volume to higher cost facilities, and the impact of all of these factors on total costs to consumers and purchasers across all lines of business.
  3. CHIA should require quarterly reporting by private and public payers of total medical expenses, utilization, cost, and quality by product design and payment arrangement to track the effects of different designs and arrangements on cost and quality.
  4. The Division of Insurance (DOI) should develop minimum standards to protect risk-bearing providers from excessive insurance risk. 
  5. CHIA and DOI should require regular reporting from public and private payers of information sufficient to monitor trends in membership, premiums, health status, product design and payment methodology in the merged market, large groups and self-insured groups, and across those groups to track cost and market changes over time. 

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