Massachusetts has made a concerted effort in the last few years to rein in health care costs for small businesses. But new federal regulations written to implement the Affordable Care Act threaten to undercut those efforts — and saddle thousands of Bay State businesses with big increases in premiums.
State law currently allows insurers to consider a range of factors that often reduce premiums for small firms. But under the new federal regulations, most of those rating factors will no longer be allowed. For example, insurers won’t be able to consider the risks inherent to the industry a company is in, or whether the company has a wellness program, or how many employees it has, or what percentage of them participate in its health plan. Those regulations will also end discounts for small businesses that have joined health-insurance-purchasing cooperatives. When the law allowing those cooperatives passed in 2010, Governor Patrick hailed it as an important step in addressing health care costs for small firms.
The overall result of those federal regulations is that small businesses with fewer industry risks, a proactive wellness approach, and (relatively) more employees will end up subsidizing companies that would otherwise be more expensive to insure. Because small businesses and individuals are merged into one pool as far as assessing risk, firms will also end up subsidizing the costs of coverage for people buying individual plans.
There are other, better, ways to help individuals. Failing to give credit to small firms that take meaningful steps to help their employees stay healthy is counterproductive: The goal of the insurance system should be to encourage preventative measures, thereby saving on the cost of illnesses.
That’s not the only problematic news. Other federal regulations will expand the small-group market by including firms that have 100 or fewer employees; currently, the state cutoff is 50. That change won’t happen until 2016, but the anticipated result is that many of the newly added companies will also see their rates go up.
All this is a particular disappointment to the Retailers Association of Massachusetts, which has pushed hard for tools that would let small firms reduce their health care costs. “Now the Affordable Care Act is coming in and preempting everything we did, when, ironically, Massachusetts was the model for the ACA,” says Jon Hurst, president of the association.
Hurst makes an important point there. President Obama has repeatedly pointed to Massachusetts as evidence that his new health care law will work. Governor Patrick, a close friend of the president, has backstopped that message by praising this state’s law.
Because this state was so far ahead on health care, the assumption had long been that Obamacare would work in concert with the state law, not be disruptive to it. Prior to the finalization of the rules, Patrick administration officials had asked federal regulators for latitude, and had even pursued a waiver from the federal rating rules.
“Obviously the latest rules from the federal government have a significant impact on Massachusetts,” says Joseph Murphy, the state’s insurance commissioner. “We will work with our colleagues at the federal level to try to mitigate the adverse impact these changes may have on Massachusetts businesses.”
There’s been little apparent progress on that front, however. No wonder, then, that a frisson of concern is coursing through the state’s health care sector.
So far, the Patrick administration has attempted to resolve this matter quietly and below the radar, through negotiations with HHS. But the time may have arrived for Patrick to escalate the urgency by taking this matter up with Obama himself and speaking up publicly about the problems the federal regulations would cause here. Senators Elizabeth Warren and Mo Cowan should also lend their energy to this effort.
The Obama administration needs to pay special attention here. Imposing one-size-fits-all regulations on a state that already has universal health care and is leading the way on cost containment is counterproductive to say the least.