Massachusetts Governor to try to aid small business through state health rate regulation proposal

Oct 20, 2009

From the Boston Globe

Published on October 20, 2009

Patrick to try to aid small business

Wants state to review health care premiums

Governor Deval Patrick is expected to announce a plan today that would give state insurance regulators the authority to review health insurance premiums that are charged to small businesses, an approach meant to stem the growing health care costs.

Patrick plans to outline the proposal this morning in Quincy, according to several administration officials who spoke on the condition of anonymity.

The administration will begin looking more in depth at the health care premiums charged to small businesses, partly in an effort to resolve complaints that small firms are being driven to the brink of bankruptcy by double-digit rate increases.

“In the insurance industry, people are going to be taking a lot of notice,” said one administration official, who was not authorized to speak publicly in advance of the governor’s announcement. “We’re . . . using all the power that we have to alleviate the cost pressures that the small business community has been feeling.”

The administration plans to draft legislation that would give the state’s Division of Insurance broader authority in reviewing insurance rates before they are implemented, a move that state officials hope will give them and small businesses greater understanding over what is driving the cost increases.

The state also proposes to hold hearings next month to examine the differences between health care rates for small businesses and large and to explore whether small businesses be allowed to form cooperatives so they can bargain for cheaper insurance rates.

Allowing small businesses to band together to buy health insurance would be a major shift that could pit small business advocates against large health insurance providers.

Small businesses have long maintained that they are at a disadvantage because they do not have the buying power that large corporations have to obtain cheaper insurance rate. A 1996 state law prohibits small businesses from negotiating as a group.

“The whole health care reform in Massachusetts had previously been centered around big government and big business,” said Jon Hurst, president of the Retailers Association of Massachusetts, which represents many small businesses. “We’re excited about it, because it puts the big insurers on notice that the administration, the regulators, are not going to put up with these double-digit increases anymore.”

The proposal will probably be opposed by insurance providers, who suggest that the governor is singling them out, while ignoring the primary cause of the problem.

“This is the wrong prescription for health care,” said Dr. Marylou Buyse, president of the Massachusetts Association of Health Plans. “The governor’s proposal misses the mark, and it fails to get at the main drivers of health care costs, and that’s the rates that doctors and hospitals are charging for their services.”

Small business owners have said that they are shouldering annual double-digit increases as they struggle with the economic downturn. Larger businesses typically face 7 to 9 percent increases.

“I welcome the conversation and certainly want to participate in some way,” said Richard C. Lord, a board member of the Connector Authority, the state agency that oversees the 2006 insurance law, and chief executive of Associated Industries of Massachusetts, the largest business group in the state. “We’ve got to start somewhere.”

Some of the issues stem in part from the state’s 2006 landmark health care reform law. State law requires businesses with the equivalent of 11 or more full-time workers to offer coverage or pay a penalty.

President Obama has been praised by small business groups because his national health care reform proposal would offer tax credits to offset costs and would create an exchange in which employers could buy coverage at competitive prices.

During the national debate on health care reform, Massachusetts has been held up as an example, both by proponents, who point to the number of residents who have health insurance, and by opponents, who point to soaring health care costs.

Matt Viser can be reached at