Over the past several years, we have witnessed a concerning trend: healthcare costs in Massachusetts continue to rise at rates in excess of inflation.

These increases are the primary component in the annual "trend" factor used to generate group medical insurance premiums. According to recent data from the Massachusetts Center for Health Information and Analysis (CHIA), the cost of healthcare services has been steadily climbing, placing a significant financial burden on individuals, their families, and employers alike.

Unfortunately, based on what we are learning, the trend is going to climb at a faster rate in the coming months.

What's The Root Cause?

Compounding these challenges is the apparent lack of influence that the Massachusetts Health Care Cost Growth Benchmark has had on healthcare provider reimbursements. The benchmark was implemented in 2012 as a guideline for healthcare pricing. The benchmark for CY2024 was determined by the Massachusetts Health Policy Commission and set at 3.6%. This leaves insurers and plan sponsors without a clear reference point for assessing and controlling healthcare spending, underscoring the need for alternative strategies and innovative solutions.

Additional pressures contributing to this escalation include the potential exit from the state by Steward Healthcare System along with the closure of New England Sanai in Stoughton. Steward, a for-profit system, owns and operates eight other facilities in Massachusetts. The closure of these healthcare facilities not only disrupts access to vital medical services for residents in affected areas but also adds strain to the remaining healthcare infrastructure, potentially driving up costs even further. This raises questions about the future of healthcare delivery and affordability in our state. Changes in ownership could have far-reaching implications for patients, providers, and overall healthcare costs, necessitating careful consideration and initiative-taking measures to mitigate potential challenges.

Cost Drivers Continue to Mount

In Massachusetts, more than 2.3M residents were enrolled in MassHealth/Medicaid programs at the beginning of this year, compared to 1.8M residents five years ago. This is an increase of 23% during a period when the population grew only 1.7%. Approximately one third of the state population is now enrolled in a MassHealth plan. This high enrollment results in providers treating more people tied to a Medicaid reimbursement rate that represents a financial loss. Providers are looking to employer group medical plans to offset this loss.

What MA Employers Are Doing About It

Considering these developments, many Massachusetts employers are starting to explore what might be considered less conventional approaches when designing group health plan funding solutions, including:

• Self-Funding or Level-Funding – Empowers employers with the opportunity to reduce plan costs while protecting against large losses with insurance programs. 
• Group Captive Programs – Groups of like-minded employers working together to build a strategic healthcare funding arrangement and socialize risk. 
• Shared Funding Arrangements (e.g., OneDigital’s Benemax Program) – Provides employers with the ability to decrease monthly plan costs with the added security of a fully-insured plan. 
• Reference-Based Pricing (RBP) – A form of self-funding that reimburses claims based on a benchmark, such as Medicare reimbursement rates, to reduce the cost of claims within a plan. 
• Individual Coverage Health Reimbursement Arrangement (ICHRA) – An ICHRA program gives an employer the ability to take advantage of premium rates in the individual market that may be lower than the cost of group plan premiums. 

By embracing innovative models and thinking strategically, we can explore cost-effective solutions that prioritize the well-being of employees while addressing the escalating costs of healthcare.

As we navigate these complex healthcare challenges, it is essential that the business community in Massachusetts come together to advocate for meaningful reforms and sustainable solutions. By fostering collaboration and sharing our voices, we can work towards a future where quality healthcare is accessible and affordable for all residents of Massachusetts.

To explore what employee benefit solutions may be the best fit for your organization, connect with your OneDigital account team.

Want more Massachusetts specific content, read our MA PFML blog here!