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Governor Seeks to Head Off Premium Shock from Federal Health Reform

Posted on May 1, 2015

Governor Charlie Baker is seeking to preserve several key elements of the Massachusetts health-insurance market rather than implement provisions of the Affordable Care Act (ACA) that could raise premiums for some small Bay State employers by more than 50 percent.

health_careThe governor, in a letter Monday to U.S. Health and Human Services Secretary Sylvia Matthews Burwell, asks the federal government to postpone the requirement that Massachusetts expand its small-group health-insurance market next year from companies with 1-50 employees to those with 1-100 employees.

Baker also seeks permission for Massachusetts to use its current group of rating factors to price health insurance for small businesses. The commonwealth 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 governor says in his letter to Burwell that “there continues to be significant concern about the impact the ACA market rules will have on the Massachusetts market.”

“Decreased use of the rating factors has already led to significant premium swings that have disproportionately affected small businesses,” Baker writes.

“The eventual elimination of the rating factors, as well as the restriction limiting insurers to file their rates on an annual basis, will lead to further disruption and instability in the marketplace.”

Former Health and Human Services Secretary Kathleen Sebelius rejected a request from then-Governor Deval Patrick in September 2013 for a waiver from the same provisions of federal health reform. Rejection of the waiver came despite last-minute letters of support to Sebelius from U.S. Representatives Michael Capuano, Stephen Lynch and William Keating.

Associated Industries of Massachusetts strongly supports Baker’s request to maintain portions of the successful 2006 Massachusetts health-care reform.

“Imposition of new definitions of the small-group market and elimination of rating factors introduces needless uncertainty into the market for health insurance. Why disrupt a system that works here in Massachusetts where 97 percent of people have health insurance?” said John Regan, Executive Vice President of Government Affairs at AIM.

Massachusetts has begun a four-year transition period under which the value of the rating factors that will eventually disappear slowly decreases:

  • For plan years beginning on or after January 1, 2014 but before January 1, 2016:  Two-thirds of the level of the value of the disallowed factors may be used;
  • For plan years beginning on or after January 1, 2016 but before January 1, 2017: One-third of the level of the value of the disallowed factors may be used;
  • For plan years beginning on or after January 1, 2017, issuers must be in full compliance with federal rating rules.

The decrease in (and eventual elimination of) certain rating factors could result in premium rate changes for certain groups. 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.