Massachusetts employers received good news on health insurance costs this afternoon as the Baker administration announced a 10-month transition period before federal health reform reclassifies companies with between 51 and 100 employees in a manner that will in many cases raise premiums.

The transition period will allow companies with 51-100 workers to buy insurance under current rating system until October 1, 2016, instead of the January 1, 2016 established by the federal Affordable Care Act (ACA). The ACA requires that Massachusetts extend its individual/small group health insurance market (normally for businesses 1-50) to businesses with up to 100 employees, a move that will completely change the way rates are established and affect both premiums and market volatility.

Massachusetts will be the 35^th state to invoke such a transition period. The action does not require permission from the federal government.

“I am pleased to announce that this guidance will help mitigate substantial premium increases for many Massachusetts residents,” Baker said in a statement. “Allowing employers with 51-100 employees to remain in the large group market will retain a level of rate predictability and plan flexibility for both employers and their employees.”

Announcement of the large-group transition period comes two months after the U.S. Department of Health and Human Services granted Massachusetts relief on another issue by giving 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.

“The Baker administration has taken a significant and positive step toward helping the small- and medium-sized employers that form the backbone of the Massachusetts economy avoid volatility in the health-insurance market” said John Regan, Executive Vice President of Government Affairs at Associated Industries of Massachusetts.

He added, however, that AIM is still calling upon the federal government to grant Massachusetts’ request for a permanent waiver from the requirement to place companies of 51-100 people into the merged market.

“Massachusetts has its own version of health reform that is working well and we see no reason to disrupt it,” Regan said.

Moving the 51-100 employee companies into the individual/small group “merged” market is significant because the businesses would no longer carry their own experience rating. They would instead be rated as a group with other individuals and small companies that often have more volatile health insurance claims patterns.