Small businesses in Massachusetts won some breathing room yesterday from a provision of federal health care reform that threatens to raise insurance premiums for some companies by more than 50 percent.
The U.S. Department of Health and Human Services granted Massachusetts a waiver that will allow the commonwealth an additional year to use existing health-insurance rating factors that are otherwise prohibited under the Affordable Care Act (ACA). Massachusetts has for many years used 11 rating factors in its merged individual and small-business health insurance market, but federal health reform is phasing that number down to four.
Among the factors to be eliminated in pricing health insurance for companies with fewer than 50 employees are industry, participation rate, group size, intermediary discount and group purchasing cooperatives.
The waiver extends the commonwealth’s current transition period first granted in 2013 and extended in 2014, allowing small-group market insurers to continue using two-thirds of current ratings factors through January 1, 2017, after which the ratings factors will be reduced to one third, before being phased out entirely on January 1, 2018.
The postponement came in response to a May 27 request from Governor Charlie Baker to U.S. Health and Human Services Secretary Silvia Matthews Burwell. The federal government did not respond to a second request by the governor to postpone a separate requirement that Massachusetts expand its small-group health-insurance market next year from companies with 1-50 employees to those with 1-100 employees.
“Protecting small businesses from massive insurance rate hikes is essential to making sure job creators continue to thrive here and I am grateful the Obama administration granted Massachusetts this flexibility,” Baker said.
A study by health insurance companies indicates that the rating changes could raise or lower rates for small companies by up to 57 percent.
The biggest fluctuation in terms of cost will stem from the change in the size factor. Currently, larger businesses benefit from the size factor, with smaller businesses paying more; so when that factor is limited, the larger businesses will see an increase in cost. Elimination of the wellness program participation factor is also expected increase relative premiums for groups with healthier populations.
Associated Industries of Massachusetts strongly supports Baker’s efforts to maintain portions of the successful 2006 Massachusetts health-care reform.
“The Baker Administration deserves tremendous credit for aggressively seeking a waiver to help small businesses in Massachusetts,” said John Regan, Executive Vice President of Government Affairs at AIM.
“But delay does not equal resolution. Massachusetts needs a permanent waiver from the rating-factor changes of federal reform because it’s wrong to penalize employers in the one state that led the nation on health-care reform.”
Massachusetts insured a majority of its residents under healthcare reform in 2006, establishing a state marketplace that merged small group and individual insurance markets. The ratings factors served as a protection for small employers who took on risks from the individual insurance market.