Federal officials have given Massachusetts until Friday to decide whether to separate the individual and small-group health insurance markets as the commonwealth seeks flexibility to head off premium increases under federal health reform.
State officials say they are “seriously considering” de-merging the health insurance market covering both individuals and companies with 50 or fewer employees. Massachusetts combined those markets in 2007 as part of its own health care reform effort, but the commonwealth may reverse course because the national Affordable Care Act (ACA) will require the state to eliminate rating factors designed to mitigate premium increases for small business.
Massachusetts officials asked the U.S. Department of Health and Human Services late last year for a waiver from the ACA-prescribed rating rules in cases where rating factors advance a state’s sound public policy. De-merging would be an alternative to obtaining a waiver.
A third party analysis conducted for the state estimates that changes to the rating factors could increase costs as much as 17 percent. A separate health care premium tax included in the ACA will raise costs even more. The levy would cost employers and consumers in Massachusetts $213 million in 2014 and $3 billion during the next decade.
“Associated Industries of Massachusetts supports efforts by the Patrick Administration to obtain from the federal government the flexibility we need to preserve the progress of the 2006 Massachusetts health care reform. There is no legitimate public policy reason to disrupt the work we have done over the past seven years,” said Richard C. Lord, President and Chief Executive Officer of AIM.
“A waiver would be preferable to unlinking the merged market but if we are not afforded this flexibility then de-merging the market is the next best solution.”
The merged health insurance market uses the same rules to rate coverage for individuals and for small companies. Limited premium differentials are currently permitted based upon group size, but will no longer be permitted under the ACA.
Massachusetts Insurance Commissioner Joseph Murphy, in a letter Friday to the U.S. Centers for Medicare and Medicaid Services, calls the merged market a “cornerstone” of the state health reform law.
“We have, however, communicated to (Department of Health and Human Services) staff that given the changing landscape of health care reform across the nation and how those changes may affect our current needs to successfully implement the ACA in Massachusetts, we need to re-evaluate our approach of merging the individual and small group health insurance markets,” Murphy wrote.