Legislature sends small business health insurance cost relief bill to the Governor

BOSTON – The Senate and House passed legislation last week that will reduce small business health insurance costs and promote job retention and job creation. The bill reduces premium fluctuations in the market and requires insurers to offer affordable health plans.

“The Legislature is serious about helping our small businesses thrive and keeping jobs in Massachusetts, and this bill is a step in the right direction to fight crippling health insurance costs,” said Senator Brian A. Joyce. The final bill includes a Joyce amendment that authorizes small businesses to group together and purchase health care plans at lower prices.

The legislation delivers an estimated premium relief of at least 10 percent that small businesses can save and reinvest in their operations and workforce. It also establishes standardized transparency measures for provider pricing and annual public reporting to shine a light on the market place and collect important financial information for ongoing policy discussions about long-term system reform. It also establishes a Special Commission on Provider Price Reform.

The bill requires insurance carriers to file premium rate increases with the Division of Insurance (DOI) 90 days before their effective date. DOI will review proposed premium rates and, for the following two years, may disapprove rates based on the inclusion of excessive administrative costs or surplus margins. The rigorous review process will ensure that small businesses and individuals receive the most efficient product possible.

Addressing the issue of market instability, the bill closes existing loopholes in the system that drive up premiums for everyone. By moving to an annual open enrollment period, it ends the so-called “jumpers and dumpers” practice of individuals who purchase coverage only for expensive treatment and then drop the coverage.

The bill also controls year-to-year rate volatility that leads to 30- to 40-percent increases in health care premiums for some small businesses. The cost-spiking practice of measuring the age of employees in five-year increments would be eliminated, replaced with a yearly measurement of age to smooth out the annual increases as an employee group ages.

Additionally, the legislation provides more affordable health care products to small business employers by requiring carriers in the small group market to offer at least one reduced network plan with premiums 12 percent lower than those for a full network plan.

The bill also establishes a pilot program that provides a state enhancement of the federal tax credit program for small businesses that purchase health insurance through the Massachusetts Health Connector and participate in wellness programs.

Eligible small businesses that demonstrate participation in a wellness program would receive an additional 5 percent state subsidy for eligible health insurance costs beginning 2011, bringing the total state and federal assistance up to 40 percent of employer health care costs per year.
The bill allows for providers to negotiate with insurance carriers about making voluntary contributions back into the system for small business relief. No funding will be transferred to the state. DOI will work with the institutions to ensure that every dollar is targeted to premium relief, with refunds going to small businesses this year.

The bill also:

  • Prohibits anti-competitive contract provisions between insurance carriers and health providers that restrict product innovation or tie reimbursement rates to those received by other providers; and
  • Reconvenes the “Payment Reform” commission to investigate the rising cost of health care insurance and the impact of reimbursement rates paid by health insurers to providers. The Commission shall examine policies aimed at enhancing competition, fairness and cost-effectiveness in the health care market through the reduction of reimbursement disparities. The work of the Commission will provide the necessary foundation for future action on this important issue, as highlighted by the work of the Attorney General and the Division of Health Care Finance and Policy.

The bill now goes to the Governor for his signature.