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Key lawmakers voiced support Wednesday for Gov. Deval Patrick’s bold step into the health care market, lending the governor tentative endorsement of a plan that would limit the rate hikes insurers can levy and screen the increases providers can charge.
Patrick’s move to impose an immediate “soft cap” on health insurance rate increases he deems in excess of “a reasonableness standard” drew concern from insurers, who said the payments they must make to care providers are unsustainable in the face of restrained revenues.
Patrick told business leaders he would subject all health insurance rate increases to his insurance commissioner’s discretion, and vowed that any increases “significantly higher” than the 3.2 percent medical cost inflation would be “challenged.” The governor said he would file legislation triggering disapproval of rates markedly higher than that pace, and calling for similar oversight of provider rates.
“I’m sure that folks both on the provider side and the insurer side aren’t going to be thrilled that there’d be a process to squeeze the products, but I think it might be time to do that,” said Sen. Richard Moore, co-chair of the Health Care Financing Committee.
Moore (D-Uxbridge) said Patrick’s plan sounded like “a further refinement” of a 2008 law seen as a first step toward “payment reform,” the long-sought effort to alter the way the state’s health care providers are reimbursed for treating patients.
“If [the proposals] were to pass in the form they’re going to submit, it would in effect establish a form of rate-setting for a class of business, small business, which doesn’t seem inappropriate,” Moore said.
Moore’s co-chair, Rep. Harriett Stanley, asked about Patrick’s plan, replied, “So far, so good. It may not go far enough.”
“It’s not a great solution,” Stanley said. “It might not even be a good solution. But it’s a solution that’s better than the problem.”
Stanley (D-West Newbury) said she had recently met with a small business owner from Cape Cod who had seen premiums increase 52 percent over last year, and with the Greater Marlborough Chamber of Commerce. “They were saying, ‘Let’s just get a solution in place to allow us to get to next year’.”
According to the Division of Insurance, small group premiums, the class targeted by Patrick’s move Wednesday, have risen between 8 percent and 12 percent on an average annual basis over the past five years.
Key lawmakers voiced support Wednesday for Gov. Deval Patrick’s bold step into the health care market, lending the governor tentative endorsement of a plan that would limit the rate hikes insurers can levy and screen the increases providers can charge.
Patrick’s move to impose an immediate “soft cap” on health insurance rate increases he deems in excess of “a reasonableness standard” drew concern from insurers, who said the payments they must make to care providers are unsustainable in the face of restrained revenues.
Patrick told business leaders he would subject all health insurance rate increases to his insurance commissioner’s discretion, and vowed that any increases “significantly higher” than the 3.2 percent medical cost inflation would be “challenged.” The governor said he would file legislation triggering disapproval of rates markedly higher than that pace, and calling for similar oversight of provider rates.
“I’m sure that folks both on the provider side and the insurer side aren’t going to be thrilled that there’d be a process to squeeze the products, but I think it might be time to do that,” said Sen. Richard Moore, co-chair of the Health Care Financing Committee.
Moore (D-Uxbridge) said Patrick’s plan sounded like “a further refinement” of a 2008 law seen as a first step toward “payment reform,” the long-sought effort to alter the way the state’s health care providers are reimbursed for treating patients.
“If [the proposals] were to pass in the form they’re going to submit, it would in effect establish a form of rate-setting for a class of business, small business, which doesn’t seem inappropriate,” Moore said.
Moore’s co-chair, Rep. Harriett Stanley, asked about Patrick’s plan, replied, “So far, so good. It may not go far enough.”
“It’s not a great solution,” Stanley said. “It might not even be a good solution. But it’s a solution that’s better than the problem.”
Stanley (D-West Newbury) said she had recently met with a small business owner from Cape Cod who had seen premiums increase 52 percent over last year, and with the Greater Marlborough Chamber of Commerce. “They were saying, ‘Let’s just get a solution in place to allow us to get to next year’.”
According to the Division of Insurance, small group premiums, the class targeted by Patrick’s move Wednesday, have risen between 8 percent and 12 percent on an average annual basis over the past five years.
Addressing the Greater Boston Chamber of Commerce at the Westin Copley Hotel, Patrick said, “This is aggressive, but we have to give small businesses some economic breathing room until we can implement the kind of payment reform that will curtail costs across the health care system.”
Patrick said, “I know this is aggressive, but I want you to think of this, and I mentioned this to a couple of you, as a conversation-starter. We have to dial up the urgency around this.”
Patrick called the new policy a "soft cap," and said he would file legislation installing similar reins on the provider side of the equation, a check that insurance industry executives called essential.
"I'm not sure this is going to lower small business insurance rates. I think we need to see the details of the proposal, but at the end of the day health insurance premiums reflect the cost of medical care," said Lora Pellegrini, acting president and CEO of the Mass. Association of Health Plans and a former top aide to both Patrick and his gubernatorial rival Republican Charles Baker, when Baker was CEO of Harvard Pilgrim Health Care.
“It appears to be a hard cap,” said Michael Widmer, a key architect of the 2006 health care coverage expansion law and president of the Mass. Taxpayers Foundation, a business-backed think tank. “I have serious concern about anything that approaches rate regulation.”
“If, in fact, they are going to force increases to be less than 3.2 percent, if that’s what he’s saying, then that will have serious negative long-term consequences for the state’s health care system,” Widmer said. “Rate regulation has been shown over and over not to work. It does not address the underlying systemic problems, and that’s what has to happen. It may be an emergency but it carries serious risks of undercutting the state’s economy.”
Bill Vernon, state director of the National Federation of Independent Businesses, said, “I think we have to take action in the short term. If that’s what it requires, fine. My answer to that is that I think, and all of us have learned, I guess with health care, there’s no silver bullet. We did health care reform in Massachusetts in 2006. We didn’t do costs, that’s the problem now. It’s always been the problem.”
Under Patrick’s proposal, beginning in July, insurance carriers in the state’s small group market would need to provide at least one product within a reduced provider network featuring premiums at least 10 percent lower than those for the full network plan.
Patrick is also looking to impose a moratorium on new mandated insurance benefit requirements until July 2012. The governor’s plan also creates two annual open enrollment periods for people who purchase their own coverage, aimed at discouraging them from buying insurance only when they need it.
Legislative Republicans were slow to comment on Patrick’s regulation proposal. Both House Minority Leader Bradley Jones and Senate Minority Leader Richard Tisei, Baker’s running mate, said they had not seen the details.
The Mass. Association of Health Plans pointed to a recent report filed by Attorney General Martha Coakley concluding that market influence of some providers was a prime factor in driving service prices, provider rate increases had driven most recent cost increases, and that differences in provider rates were not linked to care quality, the types of patients treated, or whether a hospital was a teaching or community facility.
MAHP said they preferred legislation filed by Moore and Stanley aimed at cost control, touted as a way to reduce small business premiums by as much as 22 percent.
Greeted with a standing ovation, Patrick on Wednesday also discussed his previously disclosed plans to prevent an unemployment insurance rate hike this spring and to authorize a new tax credit for job creation. Small businesses that create and retain new full-time equivalent jobs this year will be awarded a $2,500 tax credit for each net new job they create, under Patrick's plan.
The credit would be capped at $50 million, with breaks awarded on a first-come, first-served basis to businesses with 50 or fewer employees. That threshold has evolved in recent days, after an initial peg of 30 workers. Patrick discussed the threshold Monday during a meeting with legislative leaders.
To qualify, companies must create a new full-time position and retain it for at least a year.
Tisei called Patrick’s proposed business tax credit “a fig leaf.”
“If the governor really wanted to try and save jobs and create jobs in this state, what he should really be doing is repealing his combined reporting tax,” Tisei said.
“It’s good that he’s offering a tax credit for small employers,” said Tisei (R-Wakefield). “The Republican caucus did that two years ago, but ultimately there are larger forces in play right now.”
Patrick estimates the UI rate adjustments will save employers on average $158 per employee, or $391 million in total, below what they would have paid if the scheduled had been preserved. The UI fund, under the weight of rising unemployment, has slipped into the red, requiring the state to borrow from the federal government for the foreseeable future to pay benefits.
Widmer said that, even with the so-called freeze on UI rates, employers were still on track to pay $260 million more, or $111 per employee, above 2009.
The limits on insurance rate hikes would also apply to businesses with 50 or fewer employees.
Patrick said Insurance Commissioner Joseph Murphy would file an emergency regulation today requiring insurers to notify the state of their intended rate changes 30 days in advance.
“We expect the insurers to come forth, tell us what they are planning, justify it,” Patrick told reporters after his speech.
“If someone has a good reason why it should be higher than that, then this is their opportunity to explain it,” he said.
Patrick won a standing ovation, a far more enthusiastic welcome than he was due to receive last Thursday in Plymouth, where labor unions picketed a speech that he ultimately canceled at the last minute.
Unions signed off on some elements of Patrick’s unemployment insurance plan, support they had withheld until the UI reforms, which Patrick promised in conjunction with the rate adjustments, were revealed.
The rate changes, “as long as they're coupled with these reforms, is more easily accepted,” said state AFL-CIO spokesman Timothy Sullivan.
The umbrella labor group backed Patrick’s proposal to strip obstacles to UI access, among them a yearlong disqualification for some workers whose highest-paying jobs were not their most recent. The AFL-CIO said it also supported restoring benefits eligibility for temporary workers who are actively seeking work and have not refused an offer of suitable work. A measure restoring full benefits to workers who had two jobs then lost their second, part-time position and later their full-time job through, in the AFL-CIO’s phrasing, “no fault of their own,” also won an endorsement.
Senate President Therese Murray announced an economic development proposal earlier this week that largely dovetails with Patrick’s, including a plan to consolidate the state’s economic development agencies.
The Senate on Wednesday morning gave initial approval to House-approved legislation that, if passed, would prevent an unemployment insurance rate hike scheduled to hit Massachusetts employers this spring.
After a short session, Sen. Bruce Tarr (R-Gloucester) and Sen. Anthony Petruccelli (D-East Boston) both said efforts to spark job growth were driving the momentum behind the bill and overshadowing any concerns that the state's unemployment insurance fund is marred in red ink and will require years of federal loans to keep benefits flowing to the jobless.
The Senate plans a formal session Thursday afternoon when another vote UI rate bill could occur.
Tarr said he expected proposed reforms to the unemployment insurance system to be debated in a separate bill and predicted the reforms would get a more objective look if included in legislation that did not feature the pressure involved with passing rate adjustments.
Calling efforts to slow rate hikes “imperative," Tarr said, "It's one of the most basic things we can do to help business struggling during the recession." Asked about concerns over the fund's solvency, Tarr said that unless employers get a break on rates, "we could well end up with fewer businesses paying into the trust."
Petruccelli, asked about the fund's health, said that "people are more concerned about what the impact will be if the increase takes effect."
Patrick’s move to regulate insurance rates comes after the administration in 2007 pushed through, over some Democratic objection, a deregulation of the auto insurance market that has met warm reviews.
The state backed off health insurance regulation in 1991, aimed at enhancing and protecting access while establishing a fair payment system, over some Democratic criticism that market forces would override overtures toward quality and affordable treatment.
