Give us more money

In her report June 22, 2011, the Massachusetts AG suggested that provider market power might require “temporary” price controls as the system transitions to new payment models. A radical suggestion, but plausible given the degree of market concentration by some MA providers. Predictably, the Massachusetts Hospitals Association really, really disagrees. (CommonHealth’s story is here)

The much more surprising part of the MHA press release came at the end, essentially asking for hundreds of millions of dollars from Blue Cross and other health plans. The background is the need for solvency reserves for risk-bearing provider organizations. BCBSMA and other local health plans currently hold several hundred million dollars in solvency reserves for health claims, required by state law. In the last sentence, MHA suggests “possible reallocation of these reserves needs to be considered…” Here’s the full paragraph:

Finally we recommend caution regarding the development of regulations regarding solvency standards, and oversight for providers who contract to manage the risk of insured and self-insured populations. Extensive public discussion should accompany any attempt to impose further government regulation as it could impede the desired progress towards payment reform. Importantly, as demonstrated by reports from the administration in past years, there are adequate risk reserves in the system, but these reside with the current ‘bearers of risk,’ the insurance companies. As risk is increasingly transferred to providers, the rationale for insurance companies to keep building reserves needs to be examined —and possible reallocation of these reserves needs to be considered in order to minimize additional costs to the system.

Expect a fight on this one. Or perhaps it is just a warning shot on the broader issue of solvency regulation of providers bearing insurance risk.

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