State Agrees To Higher Insurance Plan Deductibles

Insurance Commissioner Says Costs May Lead To “Self-Rationing Of Care”

BOSTON, FEB. 13, 2025…..Regulators approved higher deductible limits for health plans in 2026, but stressed reforms are needed to tackle affordability concerns and ensure Bay Staters don’t end up “self-rationing” care.

Most residents ages 18+ are required to have health insurance under state law, and regulators set deductible limits each year that help specify what type of plan coverage is sufficient. People face tax penalties if they do not enroll in affordable coverage or their plan falls short of certain standards.

The Massachusetts Health Connector Board voted to raise the minimum creditable coverage (MCC) deductible limit for individuals to $3,200 in 2026, up from $2,950. The new limit for families would be $6,400 in 2026, compared to the current $5,900.

Regulators last year did not raise limits and maintained the same threshold from 2024 due to high inflation.

The higher deductible limits mean policyholders might need to pay more out of pocket, but also create more flexibility for insurers and employers as they design plans and keep up with rising care costs and inflation.

“Each year, we aim to balance our responsibility to set a common standard or floor, while also ensuring that people with generally robust or market-standard coverage are not penalized,” Kayla Scire, associate director of policy at the Health Connector, said during a meeting.

The tax penalty could cost people between $300 and $2,200, the Department of Revenue said this month.

Board member Erik Gulko, president of Innovo Benefits Group, was “very happy” about the higher limits.

“I look at it this way: There are a lot of taxpayers that have plans that are $3,000-deductible,” Gulko said. “And over the last year, when we had it at $2,950, because of a $50 difference, they have been unexpectedly and inadvertently subject to a tax. So I’m happy that all those that have that $3,000 deductible, they don’t have to pay a tax now. It’s a great change.”

Board member Michael Chernew said he supported the staff’s recommendation to adjust the deductible limit, but more broadly criticized the use of deductibles and their impact on cost-sharing. Chernew, a health care policy professor at Harvard Medical School, said deductibles can discourage people from seeking care.

“I’m not a fan of deductibles because of a bunch of other distortionary things that deductibles use,” he said. “I think what we’re voting for is some level of flexibility to allow plans to battle how they use deductible and cost-sharing things, and they will do what they will do. But I am not a fan.”

As deductibles rise, more people forgo care, warned state Insurance Commissioner Michael Caljouw.

“You wonder if there’s a somewhat illusory insurance target that isn’t really as highly insured a number because of the prevalence of deductibles,” Caljouw said. “At the same time, there’s a connection between the level of the deductible and the overall premium amount. It’s sort of a regrettable artifact of plan design.”

Caljouw encouraged regulators to explore additional tools to adjust deductible amounts and ensure “members aren’t the ones that are bearing the costs directly.” Massachusetts is at an “affordability crossroad,” he said.

“As we grapple with those issues, consumer cost share at large has to be one of the priorities for us,” Caljouw said. “Because if it remains largely unaddressed over time, through that policy lever conversation, I fear that we will begin to see rationing, self-rationing of care, increase even further than we have now, particularly with a disproportionate impact on low-income communities.”

Nancy Turnbull, who was elected Thursday to serve as the board’s vice chair, noted escalating tension between the state’s individual health insurance mandate and how regulators set creditable coverage standards.

“If deductibles keep going up, and up, and up, and we can’t control premiums, I think one of the tensions — in addition to all of the others and choices that other members of the board have made — is whether we will continue to feel comfortable obligating our fellow residents of the state to buy coverage that has higher, and higher, and higher deductibles,” Turnbull said. “And if we don’t, and some of us might not, that will erode the mandate and that will erode some of the progress that we’ve made.”

The Group Insurance Commission, which provides coverage for state employees, has kept deductibles, copays and out-of-pocket limits stable for eight years, said Executive Director Matthew Veno. That’s translated into lower consumer costs compared to plans available through the Health Connector, he said.

“But that comes at a tremendous cost, right? And it’s a cost to the plan sponsor, and in my case, it’s a cost to the state budget,” Veno said. “And it’s not insubstantial.”