MA Insurers, Hospitals Face Surcharges Under Cost-Control Bill

Payers may opt to cover their share of the surcharge in a single lump sum due in mid-2013 or over four annual payments.

S 2400 is being touted as the first effort by a state to rein in healthcare costs. It is considered a natural progression of the state's landmark 2006 healthcare reform bill, signed by then Gov. Mitt Romney (R), which includes an individual mandate. That legislation is recognized for expanding health insurance coverage, but has been criticized for doing little to control healthcare costs, which have reportedly increased an average of 6.4% per year.

Under S 2400, increases in healthcare spending would be linked to the state's gross state product (GSP) until 2017 and then slightly below the GSP through 2022. Supporters predict that it could reduce healthcare spending by $200 billion over 15 years.

A commission will be established to monitor healthcare costs and all healthcare entities—including health insurers—will be expected to comply with the performance targets or face fines of as much as $500,000. Although insurers aren't directly involved in the delivery of care, Linzer explains that because the commission will use a total system metric to assess performance, health plans must also meet the reduction targets.