State and federal officials have negotiated a deal to delay a federal policy that threatened to destabilize health insurance rates at small businesses across Massachusetts.
Governor Charlie Baker’s administration said Tuesday that the agreement will postpone for one year a piece of the Affordable Care Act that requires a change in the way small businesses’ insurance rates are calculated. Massachusetts will have to phase out its current rules and switch to the federal formula by 2019.
The rules apply to businesses with 50 or fewer employees.
Christopher P. Geehern, spokesman for Associated Industries of Massachusetts, an employer group, said that without the temporary reprieve insurance costs could have increased by as much as 50 percent for some companies.
“This is a really important issue for our members,” he said. “We still hope maybe there’s a permanent waiver down the road, but at this point the temporary waiver is good news.”
Federal rules require Massachusetts to switch to a smaller set of factors that can be considered in setting rates. The state, for example, allows for the consideration of a company’s size and industry, factors not allowed by federal law.
The Baker administration negotiated a similar delay in 2015. The latest agreement gives small businesses an additional year before switching to the new formula.
“This is an important step to help small businesses prevent insurance rate hikes for employees’ health coverage,” Baker said in a statement.
Jon B. Hurst, president of the Retailers Association of Massachusetts, said the delay is “better than nothing,” but is just postponing the inevitable.
Hurst said the state’s current rules help create fair rates, but federal rules punish small businesses.