PROVIDENCE – Facing the prospect of steep health insurance premium hikes this fall – averaging as much as 16.3 percent for large groups covered by Blue Cross & Blue Shield of Rhode Island – business leaders today pressed state officials to find ways to keep that from happening.

Health Insurance Commissioner Christopher F. Koller and Lt. Gov. Elizabeth H. Roberts addressed executives at a meeting of the Rhode Island Business Group on Health, which has joined a swelling tide of business voices saying they simply cannot afford such large hikes.

Roberts herself has rallied the opponents to the cuts, but she has focused on seizing the moment to push for changes in the health care delivery and payment system.

One of Roberts’ expected opponents in the 2010 gubernatorial race, fellow Democrat Patrick C. Lynch, the state attorney general, also has been vocal in opposing local insurers’ requested rate hikes, but has clashed more directly with Koller, demanding that he hold public hearings so Rhode Islanders can challenge insurers’ figures and arguments directly.

At a forum this morning at the Providence Marriott, Roberts took a more conciliatory tone toward Koller, noting that the public is only discussing the rate hikes because he created a streamlined process to gather information, disseminate it and solicit comment.

What’s at stake is the “rate factors” that insurers will be allowed to use to determine local businesses’ premiums for the coming year.

Each insurer is required to file a detailed outline of projected increases in different categories of medical costs, plus administrative costs and allowances for profits and reserves, with separate calculations for groups up to 50, and groups larger than 50.

Separately, Koller approves the basic formulas used by the insurers to then apply those rate factors to individual companies; for small groups, much of it is defined by law, whereas for large groups, claims experience and special incentives can make premiums vary a great deal.

And in both size categories, the bottom line is that even with an average rate increase of, say, 10 percent, one company’s rates can rise by 5 percent while another’s rise by 20 percent. As Koller told the audience, “there is an element of a black box to how your rates are set.”

But there’s a lot more transparency now, Koller noted, more regulation and more of a chance for businesses to speak out, than ever before. Detailed figures and analyses are posted on his Web site, www.ohic.ri.gov, and comments were being accepted through today.

The next step, Koller said, will be to determine whether his office can resolve the matter based on the data it has, and see whether the rate factors it comes up with are acceptable to the health plans, or whether a public hearing is needed.

“Over the next week and a half, we will decide,” he said.

Anyone expecting Koller to hit the insurers hard, however, and outright reject the rate hikes, would have to have been disappointed. Koller said it would not be appropriate for him to comment at length given that his office still has to make a ruling, but he did back up what the insurers have been saying, that medical costs, not administration, are the primary drivers of rate hikes. What’s noteworthy, however, he added, is that price inflation is a more significant factor on the hospital side – the biggest part of medical costs – than utilization growth.

“I would pay particular attention to the price increases that the hospitals are getting,” Koller said, reminding the group of last year’s dispute between Blue Cross and Care New England. “Blue Cross didn’t get a lot of support,” he noted, when Care New England sent out some 40,000 letters to patients requesting their support in contract negotiations.

Similarly, while Blue Cross is seeking a steep increase in administrative costs, Koller said, much of it is due to a projected loss of 75,000 members as businesses opt to self-insure and just hire Blue Cross to manage claims.

Koller also said federal policy changes could negatively affect local insurers’ commercial business. In 2008, he noted, Blue Cross “barely broke even” in that category, with a 0.4-percent profit margin (UnitedHealthcare of New England had a 6.6-percent profit), but it made an 8.4-percent profit on Medicare Advantage. The Obama administration wants to lower payments to Medicare Advantage plans, and that would put Blue Cross in an even tighter spot.

Many of the ineffective payment structures that plague the health care system also come from the federal government, Koller said, such as paying doctors per procedure, not per patient. And public payers’ tendency to underpay hospitals creates “a game of hide the pea,” he said, in which hospitals push costs onto whomever they can get to pay them.

Asked what Rhode Island can do today to stem cost increases, Koller offered two suggestions: require everyone to pick a primary care doctor to coordinate their care, and create an “all-payer system” such as Maryland’s, in which a centralized agency regulates what hospitals can charge public and payers alike, to avoid cost-shifting.

Roberts, a leading advocate for health care reform in the state, said businesses should take these “huge” rate hike proposals as a “call to action” to address the underlying cost drivers.

“This level of inflation far exceeds the national level,” she said. “It’s very important that we say, ‘Time out.’ Because it’s not just doable. It’s not about blame, it’s not about finger-pointing. It’s just about saying, ‘We cannot absorb this’.”

Another speaker this morning, former state human services director Christine Ferguson – a key architect of RIte Care and veteran of health care reform at the state and federal levels – said businesses also should pay close attention to what’s happening in Washington, because “health reform is here, and it has to happen.”

Even with large Democratic majorities to push reforms through Congress, however, a lot could still go wrong, Ferguson said, if legislative leaders get caught up in fights over specific points – whether it’s taxing employer-sponsored benefits, or creating a public health plan.

“My concern,” she said, “is that the devil really is in the details.”

The Rhode Island Business Group on Health has extensive materials posted on its Web site regarding state- and federal-level health care reform efforts. To learn more and see the slides presented by Koller and Ferguson, go to www.ribgh.org.