As a small business advocate, I have consistently supported the goals of the landmark health care reform law in Massachusetts and worked with our state’s leaders to ensure that small employers are not put at a disadvantage. It’s taken seven years of tweaking to get us to a point where there is real small employer fairness and meaningful cost containment in our health system.
So when the Obama administration started the process of implementing the Affordable Care Act, many of us in Massachusetts thought the ACA would hold us harmless since we were the model for the federal law. Unfortunately, that is not the case as evidenced by three regulatory actions in recent months.
Shortly after the 2012 election, the Obama administration issued rules regarding “Essential Benefits” — the mandatory benefits to be contained in insurance policies. Federal preemption of costly, non-essential state mandates passed through the lobbying efforts of specialty providers would have been welcomed. But the decision was left to the states if they wanted to keep the mandates in place for small businesses. Yet more flexibility exists for big businesses operating under federal law to avoid those mandates and resulting costs. For instance according to the Massachusetts Division of Insurance, 37.5 percent of large, self-insured employers in the state do not cover full infertility treatments, but all small businesses must cover them under the law. The result of this regulation is that employees of small businesses will be forced to purchase services they don’t want, will never use and can’t afford, while others can avoid the costs.
While the first rule left decision making to the states, the second regulation unfairly gutted and preempted state rate setting laws. The Obama administration has decided to throw out important state rating factors that seek to fairly apportion premiums for small businesses according to relative risk and cost.
This is a big deal because states use rating factors to require fair small business rates, and also use them as an economic incentive to grow jobs. In addition, innovative non-profit cooperatives designed to level the playing field with big business on premiums, education, choices and wellness are now working in Massachusetts, yet are being stripped of their financial and market power tools under this federal rule. By removing job growth incentives, group buying and premium incentives to be healthier and more effective consumers, the implementation of the ACA is going to hurt important Massachusetts reforms which should be models for the country.
The third ACA regulation is on the important role of employer wellness programs, yet the rule is ineffective and discriminatory for small businesses. Large employers invest in wellness programs to prevent and treat chronic conditions, which lead to lower claims, which in turn lead to lower premiums — often 15-25 percent lower. Reductions in premiums for wellness efforts should be available for employees of large and small companies. Yet the new federal wellness regulation merely allows for co-premium differentials for employees while not creating an actual mechanism for lower overall premiums for the participating small businesses. One employee engaging in a wellness program could in theory pay a lower co-premium than a worker who does not participate, but those efforts do not trigger a premium reduction to the small employer from the insurer — while it does for big businesses.
So why would a small business go through the costs of implementing a program when it doesn’t save them one dime on their group insurance premiums? The wellness disparity under the law is discriminatory and will result in small business employees paying far higher premiums than those working for large companies and will ultimately lead to less healthy people working for small businesses.
The feds are clearly getting it wrong under the ACA as it affects small businesses — on state mandates, rating factors and wellness programs. They are lowering the consumer rights of small business employees to those of individuals rather than elevating them to the level of those working for large employers. These decisions ignore the fact that small employers compete for both customers and workers with big businesses.
Our Main Street businesses and their employees deserve the same opportunities in the market as those who work for large employers. If those implementing the ACA don’t figure that out quickly, small business support for the ACA and the Massachusetts reform will evaporate. For the future of both reforms, the Obama administration should step back and either grant Massachusetts a waiver to continue our small business initiatives, or to go back to the drawing board and revise these misguided regulations.