Pioneer Files Request for the Administration to Release Its Report on the Impact of The Federal Health Law on Massachusetts’ Small Businesses
The report is known to indicate that the ACA will cause “extreme premium increases” for small businesses
BOSTON – Today Pioneer Institute filed a Freedom of Information Request (FOIA) for all drafts of a March 2012 Division of Insurance (DOI) initiated special examination report that looked at the impact that certain changes required by the federal Affordable Care Act (ACA or ObamaCare) will have on the small group market and to permissible rating factors used in Massachusetts.
“In order to have an honest and transparent debate on the impending changes that our citizens will face under the ACA, these documents should be immediately released,” says Pioneer’s director of healthcare policy Josh Archambault. “State leaders have known the impact of these changes for almost a year, and have hidden the impact for long enough.”
In a December 26, 2012 joint letter from the Commissioner of Insurance and the then Executive Director of the Massachusetts Health Connector to the Centers for Medicare & Medicaid Services (CMS), the state warned of the need for additional flexibility or a waiver from the new federal requirements or a significant number of citizens in Massachusetts will experience “extreme premium increases.” The letter referenced the DOI report.
Rating factors are used to determine the premium cost of insurance for citizens on fully-insured plans or buying insurance on their own in the Commonwealth. Recently finalized federal ACA regulations shut the door on any state flexibility on rating factors. As a result, Massachusetts will replace current state law with statutorily required federal rating factors. Currently insurers are allowed to rate utilizing factors such as age, industry type, participation-rates in a program, group size; intermediary discounts; and group purchasing cooperative discounts. Under federal law they are only permitted rating based on individual versus family enrollment; geographic area; age (within a 3-to-1 rate band, up from the current 2-to-1 rate band); and tobacco use. This “simplification” of the rating process will result in some premiums decreasing but many increasing.
In addition, a coalition of business organizations recently sent a letter to the Governor highlighting an additional issue. The new federal rules require that the two states that have a merged marketplace (i.e. the risk pools for small groups and individuals are merged) must change from quarterly rate adjustments to only once a year. This change will require insurers to set rates once a year without the benefit of reviewing claims experience that can influence rates. As a result, because of the implementation of the federal healthcare law some small group rates will be set for over 18 months. The letter highlights that this change could hurt small businesses by forcing them to pay higher premiums without the benefit of renewing at their regular anniversary date. They provide a recent example:
… in November 2012 the Division of Insurance approved average premium base rate increases of 3.6 percent for first quarter rates in 2013 for small businesses and individuals. Three months later, the Division approved average premium base rate increases of 2.7 percent for policies renewing on April 1. The decrease was due in part to lower than expected utilization, along with efforts to lower costs and move to alternative payment methods. If the federal rule was in place in 2013, all small businesses would be required to pay the January rate with none benefiting from the decrease as seen in the subsequent quarter.
This change could also increase the cost of the ACA for federal taxpayers. Since the affordability threshold (i.e. how much an individual has to pay for insurance) in the Connector is firmly set as a percentage of income, and will not change based on increasing premiums, any additional increase in premiums will drive up the cost of the tax credits available to these individuals. While a nice feature for the individual, it will increase the cost to the federal government and taxpayers. This factor was never included in any cost estimate by the Congressional Budget Office.