04 August 2010

Massachusetts: Small Businesses Applaud new Health Care Measure

Boston Globe

Small-business leaders say new legislation aimed at controlling their health care costs brings them a giant step closer to leveling the playing field in Massachusetts’ David-and-Goliath-like health insurance system.

Business leaders, insurers, health care providers, and advocates yesterday were still scouring the 63-page document passed late Saturday as lawmakers raced to wrap up their legislative session for the year. The legislation, which awaits the governor’s signature, would allow some small businesses to band together to negotiate cheaper insurance rates, a move small-business leaders have long lobbied for. They say they lack the clout of larger businesses to bargain for more affordable insurance for themselves and their employees. If signed by the governor, the measure would become law immediately.

The measure, a compromise between different bills passed earlier by the House and Senate, would also beef up the authority of the state insurance commissioner to reject insurance rate increases based on excessive administrative costs or surplus margins. Specifically, rates could be rejected if the insurers’ administrative expenses increase more than the rate of medical inflation in New England, or if insurers spend less than 90 cents of every premium dollar on health care.

Jon Hurst, president of the Retailers Association of Massachusetts, which led the group-buying initiative, called the legislation the most important reform for small businesses in 20 years.

“What we were pushing for all along was equal rights,’’ Hurst said, “and we essentially got what we were looking for.’’

Health advocates and others had strongly opposed letting small businesses create cooperatives. They said the groups would cherry-pick the youngest and healthiest workers, and that would drive up costs for thousands of other small-business employees not allowed in the co-ops.

But the legislation contains provisions to safeguard against that. For one, it gives the insurance commissioner sweeping oversight. The legislation allows for the creation of up to six group-buying cooperatives with a total of 85,000 members — which is only one-tenth of the entire small-group market — and requires the insurance commissioner to file a progress report on the co-ops with lawmakers in two years.

The legislation also aims to close a loophole that allowed consumers to buy insurance shortly before a pricey medical procedure, then drop it after, a practice that insurers said drove up costs for everyone else. The new rules will phase in an annual enrollment period, but includes exceptions for people facing life changes, such as loss of workplace insurance or the birth of a child.

Additionally, the new rules contain a provision aimed at driving down rates charged by hospitals. It would prohibit contracts between insurers and hospitals that create monopolies for some health care providers. Regulators and the state attorney general have said such practices have created soaring health care provider rates that drive up costs, but rate regulation proposals have not fared well.

Senator Mark C. Montigny, a New Bedford Democrat who chaired the committee that hammered out the compromise, said the anticompetitive push is a “really hard-hitting first step,’’ but said much more is needed to control rates.

“It’s a cannonball shot into the bow of the insurance industry and the major hospitals, saying you are all fighting and pointing fingers, but ultimately the consumer is losing and you are all benefiting from the status quo,’’ Montigny said.

Statements from the Massachusetts Hospital Association and from Blue Cross Blue Shield of Massachusetts, the state’s largest private insurer, applauded the lawmakers for passing legislation that brings some rate relief to small businesses. But both groups declined to directly address the anticompetitive contracting concerns.

Hospitals dodged a requirement, contained in a version of the bill previously passed by the Senate, that would have required hospitals doing well financially to make one-time contributions, totaling $100 million, to a fund to reduce costs for small businesses. Instead, the final measure makes such payments voluntary.

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