Beacon Hill Update: Gov. Signs Small Business Health Insurance Law

August 25, 2010

Governor Patrick recently signed into law legislation that will help small businesses cope with the growing cost of rising health insurance costs.  Currently, there are small businesses that pay as much as $26,000 for a single family policy.  If you own or work for a large business or are employed in local or state government, you get a much better price for a policy – in many cases, $10,000 less - than the cost of that same policy to a small business.

I supported legislation that will help fix this problem.  In my independent research, I found that individuals were obtaining health insurance solely to undergo expensive procedures after which they would then drop the coverage.  This was clearly not the intent of the 2004 Health Care Legislation that was signed into law.  In an effort to control costs by preventing consumers from doing so, the bill limits open enrollment for health plans to twice annually in 2011, once in 2012 and once per year thereafter. In certain cases, however, the measure permits the Office of Patient Protection to grant open enrollment waivers to allow individuals to purchase insurance outside the open enrollment periods.

One of the reasons we have seen huge premium increases for small businesses over the years is due to a law passed in the 1990s that prevented small businesses from grouping together to purchase health insurance.  The new law gives equal rights to small purchasers, allowing them to negotiate, group buy, and institute wellness programs that will result in savings for their employees.  The intent is to return real competition to the marketplace and force insurers to stop this discriminatory cost-shifting to small businesses. In addition, the law allows the Commissioner of Insurance to address rate fluctuation as a result of changes in the demographics of a group by limiting the impact of rate factors.  By having age rate adjustments applied annually, this prevents drastic increases in rates for individuals and employers.

The Small Group Wellness Program has been established to expand the prevalence of employee wellness initiatives.  Eligible small businesses may receive a 5% tax subsidy and technical assistance. This pilot program is capped at $15,000 annually.

Among the numerous other provisions included in the law, it protects against “most favored” contract provisions, i.e. cannot contract based on price paid to other provider/carrier.  Also, it prohibits contracting for the purpose of separating employees from group coverage to reduce employer costs.

Another important provision increases small business representation on the Health Care Quality and Cost Council, whose job is to develop annual cost containment goals to promote affordable, high quality, patient-centered health care.  The law adds a representative from a small business with fewer than fifty employees and adds a practicing clinician to the Council.  It also adds a seat for a licensed clinician requiring that at least 2 of the 19 council members are clinicians.

The law also requires the Division of Health Care Finance and Policy (DHCFP) to periodically review all mandated benefits at least once every four years to ensure they conform to existing standards of care in terms of clinical appropriateness or evidence-based medicine.

In an effort to address the reasons behind the increases, the law creates a commission to investigate the rising cost of health care insurance and the impact of reimbursement rates paid by health insurers to providers.  It requires a detailed report including analysis on rate disparity to be filed with the Legislature and Governor not later than February 1, 2011.

I have met with small business owners from my district who are all feeling the pinch of the current economic recession.  As costs rise and business slows, health care costs are negatively impacting small businesses and affecting their ability to hire new employees. With small businesses accounting for over 80 percent of jobs in Massachusetts, this is a problem that we must address now if we want to see job creation anytime soon.

The continuing goal of health care reform in Massachusetts is to control costs and to make reform work for small businesses, their employees and families.  Small employers started out with higher premiums than their big competition before the passage of reform and the price disparity has grown with each passing year.  Giving small businesses the ability to join together to buy health insurance represents a major step in the right direction.

If you have any questions or suggestions, please do not hesitate to contact me or for more information on issues I am working on please go to my website, www.GarrettBradley.com.

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