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This paper presents data on cost changes in the three largest commercial insurers in Massachusetts from 2010 to 2012: a period when all three Health Maintenance Organizations plans expanded global payment arrangements for their physicians

The Evolution of Health Insurer Costs in Massachusetts, 2010-12.

Review of industrial organization, no. 1 (2018): 117-137

Cited: 2|Views18
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Abstract

We analyze the evolution of health insurer costs in Massachusetts between 2010-2012, paying particular attention to changes in the composition of enrollees. This was a period in which Health Maintenance Organizations (HMOs) increasingly used physician cost control incentives but Preferred Provider Organizations (PPOs) did not. We show tha...More

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Introduction
  • The authors examine the factors that lead to changes in the medical costs of commercial insurers in Massachusetts between 2010 and 2012.
  • The use of global payments by major insurers in Massachusetts more than doubled between 2009 and 2012, and evidence has been presented that they have reduced costs in at least one insurer (Song et al 2012, 2014)
Highlights
  • We examine the factors that lead to changes in the medical costs of commercial insurers in Massachusetts between 2010 and 2012
  • We provide evidence that Health Maintenance Organizations (HMOs) that adopted global payments may have benefited from attracting lower-cost consumers disproportionately
  • We focus on distinguishing between enrollees in Health Maintenance Organizations (HMOs) and similar contracts (Point of Service (POS) plans and Exclusive Provider Organizations (EPOs)) versus Preferred Provider Organizations (PPOs) and indemnity plans. (For the remainder of the paper, we refer to the first set of plan types collectively as ‘‘HMOs’’ and the second as ‘‘PPOs.’’) We address the problem that some consumers are enrolled in multiple products by assigning consumers to the plan in which they were enrolled for the majority of the months of a year
  • This paper presents data on cost changes in the three largest commercial insurers in Massachusetts from 2010 to 2012: a period when all three HMO plans expanded global payment arrangements for their physicians
  • Our results indicate that accounting for exiters, entrants and switchers is essential to understanding cost growth and differential cost growth across plans
  • We show that HMOs—which use global payments during the time period of study—have slower cost growth than PPOs, which do not
Results
  • Costs for ‘‘exiters’’ in their final year in the sample are typically 40–50% higher than for stayers in the same plans, and this difference varies across plans.
  • Average inflation-adjusted spending per member per month increased by about 0.1% per year from 2010 to 2012.
  • Blue Cross costs fell in both years between 2010 and 2012, while Harvard Pilgrim’s costs fell by around 2% between 2009 and 2011 but rose from 2011 to 2012
Conclusion
  • This paper presents data on cost changes in the three largest commercial insurers in Massachusetts from 2010 to 2012: a period when all three HMO plans expanded global payment arrangements for their physicians.
  • There are large differences in cost growth across insurers and plan types.
  • To understand population cost changes over time, the authors need to consider changes for different sub-populations—entrants, exiters, plan switchers, and stayers—and how the separate sub-populations affect this growth.
  • The authors show that HMOs—which use global payments during the time period of study—have slower cost growth than PPOs, which do not.
  • Entrants, and exiters from the sample, the authors see substantially higher cost growth for all plans.
Tables
  • Table1: Enrollment and spending data, 2009–2012
  • Table2: Share of commercial HMO/POS members under alternative payment mechanisms. Source: Massachusetts Center for Health Information and Analysis (2015), ‘‘Annual Report on the Performance of the Massachusetts Health Care System: Data Book’’
  • Table3: Cost growth decomposition by insurance plan, full sample
  • Table4: Average costs of entrants, exitors and stayers, 2011 and 2012, examples Stayers 2011 entrants 2012 entrants 2012 exiters
  • Table5: Switching patterns
  • Table6: Change in costs 2011–2012, by plan
  • Table7: Cost growth decomposition by insurance plan, stayers only
  • Table8: Adjusted clinical group (ACG) descriptions and resource utilization bands (RUB)
Download tables as Excel
Funding
  • We also acknowledge financial support from a pilot Grant under NIH Grant P01AG005842 via the National Bureau of Economic Research
  • Shepard gratefully acknowledges Ph.D. and post-doctoral funding support from the National Institute on Aging Grant No T32-AG000186 (via the National Bureau of Economic Research)
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