The federal government will allow Massachusetts three years to phase in rules under the Affordable Care Act (ACA) that could increase insurance premiums for some small employers by 17 percent.
The U.S. Department of Health and Human Services (HHS) notified the commonwealth Friday that it could take extra time to eliminate rating factors designed to mitigate premium increases in the health insurance market that covers individuals and companies with 50 or fewer employees. The action satisfied Massachusetts officials, who previously indicated that they were “seriously considering” de-merging that market.
Associated Industries of Massachusetts commends the Patrick Administration for securing relief from the potential sticker shock of implementing the rating changes in 2014. At the same time, the extension represents a temporary solution rather than a permanent fix.
“We need to amend the ACA to allow us to keep the rating factors permanently,” said Kristen Lepore, Vice President of Government Affairs at AIM.
“We established most of these factors when we merged the individual and small group markets in 2007 to mitigate the effects on small employers. At the end of the day, when the transition is over, we will still have a merged market but no rating factors. That is not fair to small employers who have done the right thing over the past six years.”
The merged health insurance market uses the same rules to rate coverage for individuals and small companies. Limited premium differentials are currently permitted based upon group size and other factors, but will no longer be permitted under the ACA. The merged market is due to expand in 2016 to include employers with 100 or fewer workers.
Elimination of rating factors in the merged health insurance market is just one of several elements of federal health care reform that threaten to increase premiums for Bay State employers and consumers. A separate health care premium tax, for example, is projected to cost Massachusetts insurance purchasers $213 million in 2014 and $3 billion during the next decade.
State Insurance Commissioner Joseph Murphy, said the extension on eliminating rating factors will benefit both individual consumers and employers.
“This is good news for small businesses and individual insurance consumers all across the commonwealth,” Murphy said in a statement. “We thank HHS for acknowledging the work of the commonwealth in providing health insurance to our residents prior to the Affordable Care Act.”