Now ten years later, the state and public perception of these high flying insurance plans has begun to sour. When the Group Insurance Commission announced its rates for Fiscal Year 2001 in early March, it was the contracts and rates relating to its six HMOs that proved problematic.

For the first time in recent memory, the state’s GIC Indemnity Plan came in with a rate increase that barely warranted a second glance. In contrast, the HMOs registered a combined increase of 23.58% over the current year’s rates. This sparked strong debate and questions amongst the Commissioners.

“Beginning in the late 80s and into the mid 90s, retirees were constantly being cajoled into the various HMO plans. Promises were being made of great coverage for about half the cost of the Indemnity Plan,” explains Association President Ralph White. “Now we are seeing the reality of what we suspected of the HMOs. They cannot follow through on what had been promised on their shoestring budgets.”

Strong Indemnity Plan

Problems With HMOs

As has been mentioned, the main focus of GIC officials and commissioners in recent months has been the turn of fortune with the six HMOs being offered. Of the six, the nexus has been the rollercoaster ride of Harvard Pilgrim Health Care (HPHC). Although HPHC has been under the spotlight lately, the majority of the HMOs are experiencing varying degrees of financial hardship.

The focus of most of the GIC’sconcern has been the Medicare coverage offered through the HMOs. With the departure of Kaiser Perminente from the Massachusetts market, Medicare eligible retirees are finding it increasingly difficult to obtain coverage through the remaining HMOs.

Rapidly increasing pharmaceutical costs, combined with a reduction in federal Medicare reimbursement, has left many HMOs in desperate shape. Most have begun to rollback their market areas in the state, leaving the GIC to ponder the future of the benefit. It is possible that only the GIC Indemnity Plan’s OME will be available to Medicare retirees in the future.

Of the Medicare plans being offered by five of the HMOs, HPHC logged the largest one year increase at 50.98%. Health New England followed second with 47.53% and Tufts with 32.27%. Both HPHC and Tufts provide two different Medicare plans, each with varying rates.

Amongst the plans, only Fallon came in with a rate reduction at minus 6.33%. This was due to the rate having been prenegotiated in 1999. Cigna had the smallest increase at 9.86%.

A GIC report explains that, “Faced with a combination of rising medical and pharmaceutical expenses, premiums in many cases that may have been set too low in order to gain market share, and disastrous expansions out-of-state, many of our HMOs sustained serious financial losses this year(1999). Harvard Pilgrim, the state’s largest HMO and one of the premier HMOs in the United States, was placed in receivership. Tufts and Fallon, also nationally recognized for quality and patient satisfaction, were placed in voluntary administrative oversight.”

Both the Indemnity Plan Plus, as well as the Commonwealth PPO had less than average rate increases for the year. The Plus Plan, which is a networked version of the Indemnity Plan, has increased by 8.4% for individual and 8.2% for family coverage. The PPO, run by Tufts Health Plan, will increase at 6.2% for individual and 5.9% for family coverage.

Members should have received their detailed rate and plan information from the GIC in early April. These documents describe the changes taking place in detail.