Why are health insurance premiums in Massachusetts so expensive?

Despite the vast majority of Massachusetts residents being insured, more than four in 10 reported that they or their families have had difficulty affording health care, a 2023 survey by the state Center for Health Information and Analysis reported.

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But health policy experts and advocates say that, at least in the Bay State, the root cause of these frustrations do not lie — at least primarily — with profiteering insurers.

“I actually don’t think that’s really what’s happening,” said Ashley Blackburn, senior director of policy and government relations for Health Care For All, a Massachusetts advocacy group. “Generally speaking, things like claims denials and increasing premium costs — these are all symptoms of these larger, systemic issues that are driving health care costs across the board.”

Instead, experts said, insurance premium hikes are mostly fueled by the mounting cost of health care itself. This includes the cost of actual services — like seeing a cardiologist, getting an MRI scan, or filling a pricey Ozempic prescription — or a bump in utilization, which is the amount that such services are used. In 2022, total health care expenditures in the state totaled $71.7 billion, an increase of nearly 6 percent from 2021, according to CHIA data.

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“There’s this classic line of, ‘It’s the prices, stupid,’” said Paul Shafer, an assistant professor in the department of health law, policy, and management at Boston University. “The underlying cost of care is what drives things forward.”

Insurers, meanwhile, have to play catch-up by increasing premiums, which just about every major insurer in Massachusetts has done in recent years. For instance: From 2020 to 2022, Blue Cross Blue Shield of Massachusetts — by far the biggest player in the state market — increased the monthly premiums for its fully insured private commercial insurance from $537 to $605, per CHIA data.

Particularly in Massachusetts — which already has a cost-of-living among the highest in the country — consolidation by the state’s highest-priced hospital systems may also be driving up insurance prices, said Amy Lischko, a professor in the department of community health at Tufts University, and the former commissioner of the state Division of Health Care Finance and Policy.

“Those big conglomerates, they just have a lot of clout in the marketplace, more clout than the insurance companies, because if [insurers] don’t pay them what they ask for, they’ll drop out of your network,” she said.

It’s true that insurance executives, even here, can and do take home hefty pay packages. But under Massachusetts law, the vast majority of premiums — 88 percent for individual and small groups — are mandated to be spent on medical care, a threshold called the “medical loss ratio.” The federal baseline is only 80 percent, meaning insurers in Massachusetts often have to spend an even higher share of their premium dollars on patient claims than those in other states.

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Moreover, most of the major insurers in Massachusetts are not-for-profit, so they’re not subject to the same financial pressures to deliver profits to investors that, say, publicly traded for-profit firms like United are, Lischko said.

“Some of what UnitedHealthcare has done in the denials is bad for people, but some of it is trying to constrain health care costs,” Lischko said. “Because physicians — they don’t learn that in medical school. They learn that you should do everything possible, every diagnostic test possible, for anything. That’s how they learn. And they need some constraints on that. And, the not-for-profits just don’t do that. They just try to provide as much as they can.”

Lora Pellegrini, president and CEO of the Massachusetts Association of Health Plans, which represents insurers such as Point32Health, WellSense Health Plan, and Health New England, said most of her association’s members are “making no surplus right now.”

“Most of my plans are operating in the red and have significant financial challenges right now,” she said.

Dana Gerber can be reached at [email protected]. Follow her @danagerber6. Scooty Nickerson can be reached at [email protected].