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President Murray’s Small Business Health Insurance Relief Bill

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President Murray’s Small Business Health Insurance Relief Bill

Stabilizing and controlling the costs in health care insurance is critical to getting our economy back on track and to provide small businesses the relief they need to grow jobs, create jobs, and retain jobs.

This comprehensive proposal ensures that health insurance carriers offer affordable and efficient products to small businesses, addresses the current instability in the market, reduces year-to-year fluctuations in premiums, and promotes wellness programs for small businesses. It will result in average premium relief of 10-15% for small businesses–savings that can be used to reinvest in their business and their workforce.

  1. Ensuring Efficiency and Transparency of Insurer Administrative Costs

Enhanced DOI Insurance Review and Transparency

Require insurance companies to file insurance rate increases for the merged market to the Division of Insurance (DOI) 90 days before their effective date. DOI will review rates to ensure the reasonableness of administrative costs and increases, prevent cost-shifting, and monitor levels of medical service spending.

Furthermore, the DOI commissioner will annually examine the market and amend regulations in order to provide greater transparency of administrative costs where charges are duplicative or unwarranted. 

Insurer “Efficiency Guarantee”

For two years, with the DOI rate filing, insurers will have the option of filing rates under a loss-ratio guarantee called an “Efficiency Guarantee.” If the carrier does not choose to file rates with an “Efficiency Guarantee”, then DOI shall review the rates filed to ensure the reasonableness of premium increases.

Merged market rates filed under this guarantee are presumptively approved regardless of premium increase, so long as the insurer meets the following criteria for the merged market:

  • Not less than a 90% Medical Loss Ratio (MLR), and not more than 1% margin/risk reserve

  • If, at the end of the year, the insurer does not meet the 90% MLR standard, the insurer must issue rebates to all members. DOI may waive this requirement only if fiscal solvency is threatened.

  1. Controlling Year-to-Year Rate Volatility

Eliminate Age Factor Brackets

Currently, the age of employees is measured in 5-year increments for health insurance purposes. This can result in a “jump” in cost every five years as employees cross the 5-year bracket mark. This proposal would mandate a yearly measurement of age. This will smooth-out the annual increases as an employee group ages with time.

Establish Rate- Shock Bumpers

Permit DOI to annually limit the impact of the application of any rating factors on rate increases. This would apply to all allowable rating factors – not just age. As this may result in some cost-shift to the underlying trend, the restrictions cannot result in an increase to the base rate premium that exceeds 1 percent.

  1. Reducing Instability in the Merged Market

Move to an Annual Open Enrollment

DOI will phase-in an annual open enrollment period for individual members beginning this July. For 2011, there will be two open enrollment periods during January and July. Afterwards, there will be one open enrollment period every January. The open enrollment period will occur for no more than 45 days. There will be exceptions for qualifying events, including a termination of employment or a spouse’s termination of employment, reduction in the number of hours of employment, divorce or separation, relocation, child, etc.

Reduce Inappropriate Use of Individual Coverage

Immediately prohibit new market entrants medically underwriting by pushing sicker individuals out of employer group coverage and directing them to individual products in the merged market. Starting in January, 2012 the Connector will begin screening of non-group individual coverage and administering the annual open-enrollment period. Individuals who are eligible for affordable, quality group coverage through their employer will no-longer be eligible for individual coverage.

Establish a High-Risk Reinsurance Pool

DOI will establish a mandatory high-risk reinsurance pool for the merged market to reduce adverse selection among insurance plans and to lower premiums by providing greater protection against high-risk claims. Funding would be pooled from insurance companies and no state funds would be necessary. DOI would first explore whether federal dollars are available through national health care reform that could be used in the reinsurance pool to expand coverage or off-set existing costs, and would also conduct an expedited actuarial study of the costs and benefits across carriers.

Introducing New, Affordable Products

Require Selective Network Products

Require certain carriers in the small group market to introduce and offer at least one selective network plan with premiums that are at least 10% lower than the premiums for the full network product. One innovative option is for insurers and provider networks to collaborate on products in which providers agree to assume a greater share of performance risk on the achievement of a reduced medical trend.  This will incentivize network providers to accelerate the implementation of care management programs that can reduce cost by focusing on high-cost, chronically ill patients.

  1. Encouraging Wellness Programs for Small Businesses

Introduce “Business Express Plus”
Establish a pilot program that provides a state enhancement of the federal tax credit program for small businesses that purchase health insurance through the Connector and participate in wellness programs. Eligible small businesses that demonstrate participation in a wellness program would receive an additional 5% state subsidy for eligible health insurance costs from 2011 to 2014, bringing the total state and federal assistance to up to 40% of employer health care costs per year. In 2014, the federal tax credit increases to 50%, but only for businesses that purchase through the state exchange, i.e. the Connector. In addition, the Connector would provide technical assistance for all small business to establish wellness programs and to apply for federal grants as funded in the federal health care bill.

  1. Promoting Provider Contributions

Shared Sacrifice” Contributions

There are some providers that are capable of making immediate contributions to alleviate rising costs on small businesses. Leadership from these institutions must make a decision to be a part of the short-term solution for addressing the crisis in small business health insurance costs.

Providers who make such a contribution will negotiate with the carriers on the specifics of the transfer. The Division of Insurance will work with the institutions to ensure that every dollar is targeted solely to small businesses and used to defray or rebate premium costs. A $100 million commitment from the provider community would reduce all small business health insurance cost by 2.5% for one year.

Other Provisions

  • Accelerate implementation of Small Business Health Options Programs as required under federal health care reform, specifically with regard to establishing group purchasing for small businesses through a state exchange.  This provision will require the state to study the federal requirements for Massachusetts and file a report with the Legislature, including legislation if necessary. The plan will outline a pilot program through the Connector that meets the federal requirements for a Small Business Health Options Programs by January 1, 2011.

  • Establish a Mandated Benefit Expert Review process whereby the Division of Health Care Finance and Policy must conduct a comprehensive review of the cost and public health impact of all existing mandated benefits every 4 years. The Division would coordinate with an expert panel of medical professionals to ensure the on-going clinical efficacy of all benefits. If certain benefits were found to no longer conform to standards of care, the division would recommend legislation to remove or amend the mandated benefit statute.

The Need for Long-Term System Reform

We are working with Governor Patrick, Senator Richard Moore, and other stakeholders on separate legislation that sets the path for Massachusetts to transform its health care system into an efficient, integrated, patient-centered delivery system. To drive this change, this legislation will set the goal of ending the fee-for-service payment system for most providers within 5 years, while also providing greater transparency and accountability for provider contracts that impact overall cost growth.

The current fee-for-service reimbursement system pays for the volume of care regardless of whether services are appropriate or of high quality. Under a fee-for-service model, patients can experience gaps in care or excess care, often times resulting in avoidable complications. It encourages overuse of many costly services while short-changing important areas such as primary care.

The payment reform effort must also be matched by a new, independent review of provider/insurer contracts to make sure they meet our long-term goals, reduce current market disparities over time, and provide value to businesses and health care consumers statewide.

A careful, phased-in transition of this system-wide reform is achievable, with adjustments made as necessary and informed by sound data and experience. But we need to take the first step this year.

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