Three elements of federal health care reform - a tax increase on health insurance, a shift in the size of small-group markets, and a series of rating changes – could leave many Massachusetts employers and consumers with increased health-care bills once the reform law takes effect in the Bay State next year.
A review prepared for the AIM Health Care Cost and Policy Committee indicates that the tax increase on health insurance premiums will cost employers and consumers in Massachusetts $213 million in 2014 and $3 billion during the next decade. Average monthly premium costs will rise anywhere from $24.06 to $65.79 per policy, depending upon employer size and individual or family coverage.
The impact of changes to rating factors and the size of the small-group market could reduce premiums by an average of 2.5 percent for companies with 1-50 employees, with smaller companies faring better than those with 25-50 workers. The changes would increase costs 7.5-10.5 percent for companies with 51-100 workers and as much as 3 percent for companies that employ more than 100 people.
The changes include:
- Federal health reform (Affordable Care Act or ACA) will alter the rating factors next year that insurers may use to set health insurance premium rates. Health plans will be allowed to adjust premiums based only on individual versus family enrollment; geographic area; age (but cannot vary by more than three times among adults); and tobacco use. Rating factors currently permitted under Massachusetts law will no longer be allowed: industry factors; wellness program participation; group size factors; and group cooperative factors authorized under Chapter 288. The current age factor cannot vary more than two times among adults. It remains to be seen whether the state maintains this ratio or adopts the federal ratio.
- The ACA also redefines the small group market size. The ACA defines a small employer as one having at least one but no more than 100 employees. Under existing Massachusetts law the small group market applies to employers with between one and 50 employees. Although this change is effective 2014, the ACA provides states the option of delaying this method of pooling to become effective on January 1, 2016.
“Employers have no ability to change the premium tax, which is embedded in the health reform law itself, but Massachusetts state government can take steps to moderate the impact of the rating and small-group market size changes,” said William Grant, Chief Financial Officer of Cummings Properties in Woburn and chair of the AIM Health Care Committee.
“Massachusetts officials can postpone the rating changes until 2016 and can petition the federal government to phase those changes in over several years. We call upon the commonwealth to do both.”
Here is what the premium tax increase will mean to Bay State employers.
And here is what the rating changes will mean to premium costs.
The AIM Health Care Committee will continue to review and report on the many changes in store as federal health reform comes to Massachusetts.
In the meantime, employers who would like more information on the premium tax or changes in rating and small-group market size should contact me at email@example.com.