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February 2010 St@teside

Massachusetts Governor Announces Plan to Reduce Health Care Costs for Small Businesses

Massachusetts Governor Deval Patrick announced a planto help small businesses create new jobs. A centerpiece of the proposed legislation is a series of reforms to lower health care costs for small businesses in the Commonwealth. The plan would:

  • Require carriers in the small group market (50 or fewer employees) to offer at least one plan with a reduced provider network and premiums at least 10 percent lower than standard plans that still meets Department of Insurance network adequacy standards;
  • Suspend the application of new mandated benefits in small business market until July 1, 2012;
  • Create open enrollment periods for individuals purchasing insurance;[1] and,
  • Give the Insurance Commissioner the authority to examine rate changes in order to generate administrative savings and prevent drastic rate fluctuations.

Related to premium changes, any carrier submitting a request to increase their premium more than 150 percent of the previous year’s consumer price index (CPI) for medical care services will be presumptively disapproved and subject to a hearing. The Division of Health Care Finance and Policy would then be empowered to examine the contracts between the carrier and its providers to determine if their payment increases are in line with the CPI for medical services. Contracts that provide for larger increases can also be disapproved.

This examination of carrier contracts is designed to research the question of whether premium increases are driven by rising medical costs or by other non-medical expenses, including administrative costs and profits. The Massachusetts Association of Health Plans contends that the primary driver of rising premiums is increased medical costs and has responded by recommending legislation that would create a lower-cost plan for small businesses that establishes a cap on provider rates equal to 110 percent of Medicare payment rates.

[1] Note: In Massachusetts the individual and small group markets are merged. This proposal was made to prevent individuals for signing up for insurance only when they plan to use the benefits.