Health Reform Must Address Employer Costs

Posted by Katie Holahan on Oct 24, 2017 11:33:45 AM

Associated Industries of Massachusetts (AIM) is pleased that the state Senate on Monday conducted a hearing on a proposal to address the challenging issue of healthcare affordability. The primary question for AIM in evaluating any such proposed legislation is whether it eases the burden of employers struggling to provide good health insurance to workers.

health_care.jpgIn 2006, employers joined with doctors, hospitals, patient advocates, and lawmakers to forge a health-reform law that required everyone to share the responsibility for improving access to health care. Eleven years later, Massachusetts residents enjoy the highest levels of health-insurance coverage in the nation.

Yet we have failed to make progress to contain the unsustainable increases in health-care costs.

According to the most recent data available from the Centers for Medicare and Medicaid Services (CMMS), Massachusetts was the second highest-spending state for health care in 2014, shelling out 30 percent more than the national average.

Personal health-care spending in Massachusetts, per capita, has increased more than 12 percent in five years – from $9,417 in 2009 to $10,559 in 2014. Cost growth like this is unsustainable and has increased unabated in the face of attempts by both employers and the commonwealth to contain it.

Businesses, in fact, have almost nothing to show in the way of cost savings and efficiencies five years after Massachusetts made a major push toward health-care cost containment in 2012. The commonwealth has exceeded the 3.6 percent spending growth benchmark established as part of the health-cost control law of 2012 in two of the past four measurement periods.

Total Health Care Expenditures (THCE) grew by 4.2 percent from 2013 to 2014, and by 4.1 percent from 2014 to 2015. These cost increases are occurring in an industry in which experts agree that at least one-third of all care is unnecessary – delivered in the wrong setting; marked by a lack of coordination; provided with an inadequate emphasis on prevention; harmed by medical errors; burdened with rules and fraud; or just plain excessive.

Massachusetts employers have strong ideas about some of the policies included in the draft Senate health-reform legislation:

MassHealth Reforms

In a state facing an alarming deficit in its Medicaid program, employers are currently shouldering the escalating costs of the public health-care system. For the next two years, employers statewide will provide at least $200 million annually in funding for MassHealth in addition to the cost of providing commercial health insurance to their workers.

More importantly, employers are being asked to close a funding deficit absent any of the long-term structural reforms needed to solve the underlying financial problems with the program. Action must be taken to improve the efficiency and cost-effectiveness of this currently unsustainable program.

Optional expanded Medicaid plan

AIM must raise grave concerns with the notion of expanding the MassHealth program through an optional Medicaid plan (SECTION 123) without first addressing existing policies that encourage and sustain needlessly expensive health-care habits.

Employers have long sought to contain costs in commercial health insurance by encouraging cost-effective habits like relying on primary care physicians for non-emergency care. The same cannot be said for the MassHealth program. The inappropriate use of emergency rooms is an example of one major cost driver identified by the Health Policy Commission. To contain costs and facilitate coverage, we must address our greatest cost-drivers in health-care utilization across the entire spectrum of both commercial and public health insurance before we implement any sort of further programmatic expansion.

“Name and Shame” List

AIM also opposes the so-called “Name and Shame” list (SECTION 38), highlighting employers with workers in the MassHealth program. The 2006 health-reform law made employees who were offered employer-sponsored health insurance ineligible for MassHealth. The intent was to balance the requirement that employers do their “fair share” with concerns about the financial burden on the MassHealth system.

The Affordable Care Act (ACA) reversed that policy and allowed income-eligible employees to decline employer coverage and seek insurance through MassHealth. The change created a migration of newly-eligible individuals from their employer-sponsored insurance to MassHealth, substantially increasing the commonwealth’s financial burden. The ACA made public health insurance an economically rational choice for eligible residents in a state known for its expensive health-care system.

Provider Price Variation

Provider price variation includes both reasonable and unreasonable variation in the pricing of health care services. Reasonable variation in pricing should be supported and limited by a transparent marketplace in which consumers have access to clear cost and quality metrics. By mandating a minimum increase in provider prices (SECTION 111) without alleviating existing high-cost drivers, we facilitate the continued increase in price variation without seeking to understand and differentiate among the cost-drivers that result in both reasonable and unreasonable price variation.

Innovative Insurance Products

While we support market-based solutions through innovative insurance products like limited and tiered-network products, we are concerned that the differential limitations alone will be insufficient to leverage this new approach. Without a requirement that all providers participate in the contracting for such products, insurers will not always have the negotiating power to construct products in all regions of the commonwealth.

Scope-of-Practice Expansions

AIM supports the various scope-of-practice expansions included in the draft legislation. Expanding access to vital care from qualified providers for all residents of the commonwealth is a common-sense reform that helps to move us closer to a healthcare system that is efficient and effective.


AIM supports the inclusion of telemedicine services (SECTION 94) to facilitate innovative, cost-effective health-care services for consumers across the commonwealth. Telemedicine services could provide additional care options for consumers with limited access, preserve productivity, and reduce time lost traveling great distances to providers. A vital component of this policy is requirement that payment for telemedicine services cannot exceed the costs related to an in-person visit. We must prioritize innovative policies that both increase access and decrease costs for residents statewide. Telemedicine should and could do exactly that.

AIM-member employers are active participants in providing health insurance to the majority of residents in the commonwealth. Moderating the cost of that insurance and putting health care on a financially sustainable business is critical to the future of the Massachusetts economy.

Please contact me at if you would like to be updated on the progress of health reform in Massachusetts.

Topics: Massachusetts senate, Controlling Health Care Costs, Health Insurance

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