Blue Cross Blue Shield of Massachusetts Announces Lower Premium Rate Increases for Small Business Customers.

Business Editors/Health/Medical Writers

BOSTON--(BUSINESS WIRE)--Nov. 9, 2003

More than half of its small business customers will see single digit 

rate increases in 2004

Blue Cross Blue Shield of Massachusetts (BCBSMA) announced today that rate increases for its small business customers across the state will be lower in 2004, many in single digits, continuing reductions the company started last summer.

Since the third quarter of 2003, BCBSMA has offered single digit rate increases to a growing number of its business customers. In the first quarter of 2004, more than half of BCBSMA's small business customers will see a single digit rate increase in their health insurance coverage over their 2003 rate.

"Our goal for 2004 and beyond is to continue to provide health insurance rates for our small businesses that are more manageable and predictable," said William C. Van Faasen, Chairman, CEO and President of BCBSMA. "Our medical management strategy and hard work to hold down costs are paying off even faster than we expected.

"This stability and certainty comes at a critical time in the state's overall economic recovery. A number of indicators tell us recovery is underway, but job growth is still lacking. We hope the slow down in the growth of premiums for this important employee benefit will provide some of the encouragement necessary to prompt companies to hire more employees," Van Faasen continued.

BCBSMA has been able to team with doctors, hospitals, its members and its employer accounts in programs that help to improve the health of its members. This has had a very positive effect on cost trends. Disease management programs, quality incentive partnerships with doctors and hospitals, along with programs such as Living Healthy Babies and Blue Health Coach, have demonstrated that quality health care can be more affordable health care.

Results thus far in 2003 indicate that expenses are growing at a more moderate rate across the board--both medical claims paid and administrative costs. BCBSMA believes this is a trend that will continue at least into the next year or two.

This more moderate expense growth is the result of actions taken by BCBSMA, its business accounts, its members and its health care providers:

-- BCBSMA members continued to access high quality health care

services but many are doing so on a more informed

basis--buying generic drugs when they can and participating in

wellness, fitness and disease management programs offered by

BCBSMA.

-- Many businesses absorbed the premium increases over the last

few years by maintaining comprehensive coverage for employees.

Many employers are asking their employees to share in

increases by contributing more to the costs of their coverage

or by paying higher out-of-pocket costs, such as higher

co-pays.

-- BCBSMA uses more than 90 percent of every premium dollar to

pay doctors, hospitals and prescription drug bills. The

company continues to look for ways to manage costs, while

enhancing the quality of care its members receive. The company

plans to launch additional disease management programs

throughout 2004. The company is testing new technologies, such

as e-Prescribing and web doctor visits, for their cost

effectiveness and quality improvement.

-- BCBSMA also is participating in efforts to solve larger,

systemic problems in the overall public sector financing of

health care for Medicaid recipients by helping the BCBSMA

Foundation fund the Massachusetts Medicaid Policy Institute.

The lower premium rate increases for BCBSMA products are consistent with national expectations of a slowdown in health care cost increases in 2004. In studies of medical cost trend released in July 2003, many consulting firms predicted double-digit increases in claim costs (14 percent to 17.7 percent) for 2004. In other studies released just last month, however, consultants projected a smaller, 12.6 percent average increase for employers.

BCBSMA Chief Financial Officer Allen Maltz said that BCBSMA's financial strength and the improved medical trend enable the company to offer these lower rate increases this year, next year and beyond. "The medical claims expectations set in 2001 for 2002 and 2003 came in better than expected. This is consistent with industry experience, and is the principal driver of the positive results," he said. Maltz added that BCBSMA is expected to earn a two percent targeted operating profit margin in 2003. "BCBSMA is reducing premium increases in 2004 and expects to reduce the margin from two percent down to one percent by the end of next year," he said.

Blue Cross Blue Shield of Massachusetts (www.bluecrossma.com) was founded more than 65 years ago by a group of community-minded business leaders. Today, headquartered in Boston, BCBSMA is New England's largest health plan providing coverage to 2.5 million members. Consistently recognized for standards of service that are among the highest in the nation, Blue Cross Blue Shield of Massachusetts is the choice for health care consumers seeking reliable and high quality health care coverage. Blue Cross Blue Shield of Massachusetts is an independent licensee of the Blue Cross Blue Shield Association.