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A Longer Road to Uncertainty on Health Reform

Posted by John Regan on Apr 25, 2014 8:33:00 AM

Delay does not equal resolution.

That’s the message employers in Massachusetts have for lawmakers in the wake of yesterday’s announcement that the federal government will give Massachusetts an additional year to phase in insurance rating changes that could boost health premiums for some small companies by more than 50 percent.

SebeliusThe extended transition period, announced in a letter from outgoing Health and Human Services Secretary Kathleen Sebelius (right) to Governor Deval Patrick, buys the governor, the Legislature and the Massachusetts Congressional delegation another year to press the case for a permanent waiver from changes that introduce needless uncertainty into a health insurance market that was working well prior to federal reform.

“The additional year is a step in the right direction, but it does not represent a permanent solution to an issue that could severely harm Massachusetts small business,” said Kristen Lepore, Vice President of Government Affairs at Associated Industries of Massachusetts.

“Employers urge Governor Patrick and the Legislature to redouble their efforts to secure a permanent waiver from the rating-factor changes of federal reform. It’s wrong to penalize employers in the one state that led the nation on health-care reform.”

The federal Affordable Care Act limits to four the rating factors used to calculate group health insurance premiums for companies with 50 or fewer employees. Current Massachusetts law allows for additional consideration of factors such as industry, participation rate, group size, intermediary discount and group purchasing cooperatives.

A study by health insurance companies indicates that the rating changes will raise or lower rates for small companies by up to 57 percent, on top of average increases of 3.7 percent in their base insurance premiums.

Governor Patrick requested a rating-factor waiver on September 3, 2013, noting that “a waiver of rating factor requirements will avoid increases in health insurance premiums for a large segment of our small-employer population and their employees.” Sebelius denied the request on September 26.

But the Sebelius told the governor in her letter yesterday “there have been some additional policy developments … that I believe need to be reflected in the 2013 transition period outlined for Massachusetts.”

The transition period for the elimination of small group market rating factors permitted under Massachusetts law now looks like this:

  • For policy years beginning on or after January 1, 2014, but before January 1, 2015, small group market issuers may use 2/3 of the disallowed factors;
  • For policy years beginning on or after January 1, 2015, but before January 1, 2016, small group market issuers may use 2/3 of the disallowed factors;
  • For policy years beginning on or after January 1, 2016, but before January 1, 2017, small group market issuers may use 1/3 ofthe disallowed factors;
  • For policy years beginning on or after January 1, 2017, small group market issuers must be in full compliance with the rating rules under Public Health Service Act section 2701.

Sebelius writes that the federal government may consider an additional one-year extension.

“The extended transition is good for our market,” said Insurance Commissioner Joseph G. Murphy.  “The additional year will benefit our small employers and give them extra time to ensure that they are making the best insurance choices for their workers.”

A survey by AIM found that 60 percent of small employers who renewed their health insurance policies on January 1 saw increased premiums under the limited phase-out of the five Massachusetts rating factors. Among the employers who said they would consider making changes to their health plans as a result of the increases, 20 percent told AIM they plan to drop coverage all together because the price hikes are unaffordable. 

Topics: Small Business, Health Care Reform, Health Care Costs

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