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Legislature Sends Small Business Health Insurance Cost Relief Bill to the Governor
July 31, 2010

BOSTON – The Senate and House today passed legislation 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 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 marketplace and collect important financial information for ongoing policy discussions about long-term system reform. It also establishes a Special Commission on Provider Price Reform.
“I am pleased that we found some solid, common ground between the Senate and House bills to bring much-needed relief to small businesses in the Commonwealth,” Senate President Therese Murray said. “Small businesses are the main job producers in Massachusetts, and we need to give them the boost they need to stay open and grow as our economic recovery continues. This bill is a good place to start, and will bring immediate results, but we must continue our work on long-term payment reform and cost-control measures. That will be at the top of my agenda next session, and I expect a strong commitment from everyone. Long-term reform is an absolute necessity for the future stability of health care and our economy.”
“As health care premiums continue to increase, this bill is a good step towards controlling costs to help small businesses across Massachusetts,” House Speaker Robert A. DeLeo said. “This legislation represents another effort of the legislature to help businesses thrive in Massachusetts, increase job opportunities and stimulate economic growth.”
“This was an enormously successful conference committee effort that is going to result in significant savings for hundreds of thousands of people in Massachusetts,” said Senator Mark Montigny, Senate chairman of the conference committee. “The Senate has been one-hundred percent committed to passing health care reform legislation and providing relief for small business owners and employees. I’m honored to have been selected chief negotiator and delighted we produced such a comprehensive bill.”
“I am proud of this bill that will help the small businesses and working families of the Commonwealth,” said Representative Ronald Mariano, Assistant Majority Leader. “This important legislation will bring immediate cost savings relief to the individuals being burdened by drastic increases in health care premiums while providing new health coverage options for the state’s small businesses.”
“Small businesses are the vast majority of businesses in our state, and they have been hit hard by major premium increases over the past several years, making reducing health care costs essential to their survival,” Senator Harriette Chandler said. “Today, Massachusetts takes major step forward in providing relief to small businesses and their employees.”
“This legislation continues the progress toward a better and more sustainable health care system, particularly for small businesses, which are the backbone of the Massachusetts economy, said Republican conferee, Senator Michael Knapik. “I am pleased the Senate and House came together to work out a meaningful bill to benefit business owners and employees, who will enjoy increased accessibility to quality, affordable health care as a result.”
“The crushing burden of health care costs on small businesses is unacceptable,” said Senator Richard T. Moore, Senate Chairman of the Joint Committee on Health Care Financing. “While this compromise bill is not as comprehensive as the Senate's original proposal passed in May, it sets the foundation for better cost cutting through better data collection, simplified administrative procedures, uniform quality measures and reporting mechanisms that will ultimately lead us toward an effective and meaningful systemic change in the next session.”
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:
  • Authorizes small businesses to group together and purchase health care plans at lower prices;
·     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.


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