Mass. businesses don’t like insurance decision

Leaders sought exemption from new federal rules; instead US grants state a 3-year phase-in period

Massachusetts business leaders say they are disappointed with a federal decision to allow the state to phase in parts of the national health care law over three years, maintaining it doesn’t do enough to provide relief from expected insurance premium hikes.

After state officials earlier this year objected to new rules stemming from the US health care overhaul — arguing they would drive up costs for small businesses and their employees — federal health officials told their Massachusetts counterparts Friday the state could take until 2016 to fully implement rules to bring it into compliance with national standards.

But business leaders said Monday that the federal decision, while welcome, fell short of the waiver they had sought for regulations that conflicted with Massachusetts’ 2006 health care law, widely viewed as the model for the US Affordable Care Act.

“We had hoped for a complete waiver,” said Jon Hurst, president of the Retailers Association of Massachusetts, who had complained US rules would eliminate state “rating factors” that allow premium discounts for small business cooperatives that included wellness initiatives.

“This is just a way of delaying and mitigating the pain,” Hurst said.

Kristen Lepore, vice president of government affairs for the Associated Industries of Massachusetts, said the decision to allow Massachusetts more time to implement federal rules is only a temporary fix.

“There’s no legitimate reason for the federal government to eliminate our rating factors,” Lepore said. “We don’t know why we aren’t being given the flexibility to do what’s already working here.”

Eric Linzer, senior vice president of the Massachusetts Association of Health Plans, said the phase-in “will help mitigate but not prevent premium increases.” Linzer said state health insurers hope to work with the Patrick administration to change other federal rules not addressed by the phase-in, such as a requirement that insurers submit rates for small businesses and individuals annually on July 1 for the following calendar year. Insurers and small businesses have said that also could drive up rates.

The phase-in period looks “like a pig wearing lipstick to many small businesses,” said Josh Archambault, health care policy director for the Pioneer Institute, a public policy research group in Boston. Under the decision by the US Centers for Medicare & Medicaid Services, Massachusetts is allowed to dismantle its own insurance rating system in three steps rather than all at once.

“The health reform law specifically recognized the special circumstances for a state that had already expanded coverage and reduced their uninsured rate,” a spokeswoman for the centers said in a statement. “As such, we are providing extra time to transition from Massachusetts’ rules for the small group market to the new standard.”

Currently, the state lets insurers weigh about 10 factors in setting rates for small businesses. The federal government has mandated only four rating factors — age, number of family members, geographic area, and tobacco use.

In a Friday letter to Massachusetts Insurance Commissioner Joseph Murphy, a Centers for Medicare & Medicaid Services deputy administrator said the agency is trying to ensure stability for states that already “were succeeding in providing health insurance coverage for their residents prior to the enactment of the (federal) law.” The official, Gary M. Cohen, wrote that Massachusetts insurers could use two-thirds of its rating factors next year, one-third in 2015, and must fully comply with the federal mandate by Jan. 1, 2016.

Barbara Anthony, the Massachusetts undersecretary for consumer affairs and business regulation, whose regulators negotiated with the centers, said the percentages cited in Cohen’s letter refer to the economic impact of the change on small businesses using the current state factors. But she said the mechanics remain to be worked out. “We’re pleased to see their understanding of the uniqueness of our market by allowing the phase-in period,” she said of the centers. “Now we have to refocus our energies on reducing health care costs.”

Anthony said insurers will not be allowed to charge more overall for small business premiums under the federal rating factors than they do using state factors. But she acknowledged premiums may be increased for some employers even as they are reduced for others.

“If you do nothing, you will get an increase,” Anthony said. “But you don’t have to sit still. You can shop around.”