Voluntary healthcare cost limits aren't working. Should Rhode Island's insurers face sanctions?

For the second consecutive year, the cost of healthcare for Rhode Islanders blew past the target agreed to by state regulators and private insurers.

That's why Rhode Island Health Insurance Commissioner Cory King is backing a budget proposal that would enshrine the state's 2019 policy establishing healthcare spending limits, adding sanctions on insurers that repeatedly exceed the target.

The recommendation is part of a new report published Monday confirming that a majority of Rhode Islanders can't afford basic medical services, despite regulatory efforts to check insurance and provider cost hikes.

The annually updated spending threshold, established by an executive order from then- Gov. Gina Raimondo, aims to strike a balance between inflation-driven price hikes borne by insurers and providers, and affordability for the people who receive services.

The Rhode Island Office of the Health Insurance Commissioner and the Rhode Island Cost Trends Steering Committee will host a public forum Monday, May 18, 2026, to talk more about the latest findings in Rhode Island health care spending and how it compares to the rest of the region.

The event is from 9 a.m. to noon at the Crowne Plaza in Warwick.

The 2024 target limit on hospital, drug and long-term care costs was 5.1%. But per-person healthcare spending growth came in at 9.1%, with a total of $10.25 billion spent across commercial, private-pay and government insurance plans. This amounts to $10,901 per person on average.

But there aren't any consequences presently to force insurers to comply with the ceiling suggested by the Health Care Cost Trends Steering Committee, an 18-member panel of industry leaders and government administrators.

"We're talking a good talk in terms of setting these targets, but there's no way to enforce them," said Robert Hackey, a professor of health sciences at Providence College. "There's nothing wrong with setting targets, but they don't have any teeth."

All four major commercial insurers in the state exceeded the annual spending growth target. United Healthcare topped the list, reporting 11.9% year-over-year growth in commercial plans, followed by 9% for Harvard Pilgrim Health Care and Tufts Health Plan combined, 7.2% by Blue Cross Blue Shield of Rhode Island and 5.6% by Neighborhood Health Plan of Rhode Island.

"When I look at this report, I have a really grave concern that access to affordable health insurance is slipping," Health Insurance Commissioner Cory King said in an interview. "We need to go beyond the status quo to address that."

Why is spending so high?

Much of the surging costs are driven by federal policies and market factors outside King's purview, or anyone else's.

Take, for example, post-COVID federal policy changes that reinstated Medicaid eligibility recertifications. During the height of the pandemic, states maintained continuous coverage for Medicaid enrollees, regardless of change in address, income or other eligibility criteria at the direction of the federal government. The April 2023 expiration of the federal leniency led to major declines in Medicaid enrollment nationwide. Rhode Island saw Medicaid enrollment drop 10% from 2023 to 2024, the report stated.

Fewer people on the subsidized government healthcare plan and more generous federal reimbursements to hospitals for Medicaid services disproportionately inflated annual Medicaid spending growth, according to the report.

King acknowledged Medicaid-specific spending data in 2024 was an "anomaly." But the same cannot be said for commercial insurance costs, which rose 7.1% from 2023 to 2024. Commercial healthcare spending rose 6.9% increase per capita in the previous one-year period.

"That concerns me," King said. "I am worried we are going to keep seeing these higher trends than Rhode Island can afford."

Retail pharmacy costs and outpatient hospital service accounted for 40% of the rise in spending by commercial healthcare insurers, according to the report.

"It's the same story we've been seeing for the last few years," said King.

Blame it on the GLP-1s

Insurers and hospital providers balked at the prospect of sanctions as outlined in McKee's budget proposal, pointing to pricey prescriptions like the popular family of weight-loss drugs known as GLP-1s and a rise in un- and underinsured residents are the culprits of the spending surge. The rise of GLP-1s and the shortage of primary care providers, forcing patients to take their medical concerns to hospitals, also drove state healthcare spending in 2023.

"We are concerned that the proposal's approach does not adequately address the complex drivers of rising healthcare costs," Rich Salit, a spokesperson for Blue Cross Blue Shield of Rhode Island, said in an email. "A more effective and sustainable path would be for OHIC to work collaboratively with stakeholders through the existing Cost Trend Committee to design a program that promotes shared accountability for affordability across the entire healthcare system."

Kathleen Makela, a spokesperson for Tufts, defended the company's annual spending increases as in line with other states, and in part a reflection of the low enrollment numbers in its Medicaid plans.

"That smaller risk pool could mean that a handful of plan members with very high medical costs in a year represent a very large percentage of our total costs," Makela said in an emailed response. "A small number of very sick members could therefore translate to a big percentage increase in costs year over year."

David Burnett, chief growth officer for Neighborhood, questioned the state methodology, which compares different populations and insurance products across companies. And the two-year-old data "may not reflect current market conditions," Burnett said in an emailed response.

United Healthcare did not respond to requests for comment.

Demand for Wegovy and other GLP-1 drugs may eventually reach a saturation point, but the cost of uncompensated care for people without insurance is expected to swell.

'A tough pill to swallow'

Roughly 10,000 Rhode Islanders dropped out of the state health exchange this year, unable to afford the marketplace coverage after Congress let a subset of federal premium discounts expire. New federal Medicaid restrictions signed into law last summer are expected to force 38,000 Rhode Islanders off the government health care plan. The same federal law, H.R. 1, capped federal student loans and axed other higher education borrowing plans, a move experts say will intensify the healthcare provider shortage by making medical school more unaffordable.

"H.R. 1 is going to be a really tough bill for Rhode Island to swallow," Hackey said. "The next 12 months are going to be very telling in Rhode Island as the full impact of Medicaid work requirements and other changes start to be felt. It hasn't fully been felt yet."

King can't change the mood in Washington, nor force insurers to cut their rates so low that they can no longer afford their own expenses with a riskier, sicker pool of enrollees. But he can make the state-imposed spending targets more meaningful.

We're talking a good talk in terms of setting these targets, but there's no way to enforce them. There's nothing wrong with setting targets, but they don't have any teeth.

– Robert Hackey, a professor of health sciences at Providence College

A separate, Feb. 6 report by King's office recommended enshrining the state's spending target policy in state law, rather than an executive order, adding enforcement authority to the annual benchmarks. Of the eight states with annual healthcare cost growth targets, only Rhode Island andNew Jersey have not codified their benchmarks into law. The other six states are California, Connecticut, Delaware, Massachusetts, Oregon and Washington. Three — Massachusetts, Oregon and California — also impose penalties for insurers that fail to meet cost growth targets.

"There is an opportunity to codify various components of Rhode Island's program and strengthen it with new authorities to support our ability to further tackle increasing costs," King wrote in the letter that opens the 45-page report.

Gov. Dan McKee's fiscal 2027 budget proposal calls for putting the growth target in state law alongside the other policy changes King recommended.

"We must continue to find data-informed solutions to make quality health care more affordable for employers and working families," McKee said in a statement Monday.

McKee's budget proposal does not specify the fines insurers could face if they fail to comply with mandated public hearings and data-sharing on cost-reduction efforts, leaving that up to the health insurance commissioner to decide.

"There's nothing wrong with a little public shaming," Hackey said of the public hearing component. "But you're going to need some real pretty substantial fines."

Hackey proposed linking state approval of requested annual premium rate hikes to their compliance with state cost growth metrics. The annual rate review and approval overseen by King's office typically reduces the rates from what insurers' request, while still keeping an eye on their financial solvency.

Striking a balance

Observers, including Rhode Island Attorney General Peter Neronha, have vilified commercial insurers for profiting off unaffordable premiums for residents. But punishing the companies who use premiums to determine what they can pay hospitals and providers for medical services to their enrollees only ends up reducing the provider reimbursement payments, and in turn, patients, Hackey said.

"Everyone is looking for a place to find lower costs," he said. "You end up passing it to whoever has the least bargaining clout."

The Hospital Association of Rhode Island fears its 16 member hospitals could see provider payments reduced if insurers take a financial hit under McKee's budget plan.

"We think there's a better balance that can be struck," Michael Sroczynski, president of the hospital trade group, said in an interview Thursday. "We certainly don't think that increasing administrative complexity within state government is the way to solve a healthcare cost crisis."

Sroczynski instead suggested boosting state investments in Medicaid, maximizing federal matching dollars to "minimize pressure" on providers, hospitals, and insurers.

The hospital group joined with other healthcare leaders and providers for a press conference Thursday to push for its own package of legislative fixes, including companion bills by Rep. Mia Ackerman, a Cumberland Democrat, and Sen. Jake Bissaillon, a Providence Democrat, that would require the health insurance commissioner to incorporate uncompensated care into formula-driven insurance rate caps or other "affordability standards."

"As uncompensated care rises, the effects are felt throughout the system – through reduced bed capacity, workforce challenges and delays in care," Sroczynski said in a statement Thursday. "This is not the health care system that Rhode Islanders want, nor the system they deserve, and it won't correct itself without deliberate action."

King made his position clear to lawmakers in April 14 testimony, warning the bill would add "tens of millions of dollars" to health insurance premiums.

Hackey sees merits to both sides.

Adding uncompensated care to the rate review formula will raise costs, he said, agreeing with King. But failing to help make hospitals whole risks devastating closures that would push the fragile healthcare system over the edge.

"In the short term, I don't see a reasonable way to pull these numbers down unless we're going to sacrifice access and/or a supply of local physicians," Hackey said. "We're going to have to accept spending more and continue to study our options."

The legislation remains under review by committees in each chamber following preliminary April hearings, as is standard procedure for preliminary vettings.

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Courtesy of Rhode Island Current