Commonwealth of Massachusetts seeks waiver from Obamacare

A very interesting ACA development is taking place in Massachusetts today as the state that “inspired” Obamacare tries to reconcile its current law with the new federal law. Push back in the compliance effort is coming from an unexpected source, the senior Democratic budget writer in the State Senate, Senator Stephen Brewer, presumably with support from the Senate President as well. The amendment that was filed would force President Obama’s good friend Governor Deval Patrick (D), and his Administration, to seek a waiver from certain elements of Obamacare. The move could come to a head if the provision lands on the Governor’s desk, resulting in an embarrassing political moment for the Obama Administration since the ACA is forcing significant changes to a state law they claim acted as a model in Washington.

Turns out, the conventional wisdom comparing Romneycare and Obamacare has proven to beoverly simplistic, as this is the third ACA-related bill being debated in the Commonwealth. The latest sizable 100-section bill controversially writes into law an abdication of insurance regulation to the federal government and is the basis for the amendment. While state officials have known for some time that the ACA-required changes to rating factors would result in “extreme premium increases” and spike premiums for 60% of small companies(some as high as 50+%) in the state, the best the Patrick Administration could do was spread the increases out over 3 years under an agreement from CMS.

The new ACA bill produced a flurry of debate in the House last week, mostly from the Republicans, with Democrats calling it a bill of “minor technical changes.” However, in the State Senate the bill faces a surprising push back from the lead budget writer and a long serving Democrat, as numerous questions remain about the bill. See my 10 Questions About ACA Implementation in Massachusetts.

The chairman’s amendment includes the following:

SECTION 102A. The commonwealth, by and through the governor or the governor’s designee, shall formally request a federal waiver to avoid the adverse effects of rating and rule changes to the Massachusetts merged market, to protect consumers and businesses in the commonwealth and in an effort to maintain current Massachusetts rating and rule requirements. All negotiations with any federal agency concerning this waiver shall be conducted in consultation with a member of the house of representatives as appointed by the speaker of the house and a member of the senate as appointed by the senate president. The governor, or the governor’s designee shall file a detailed report describing the waiver application and waivers received, along with all documentation, including, but not limited to, all related written and verbal responses from the Department of Health and Human Services, with the clerks of the senate and house not later than October 1, 2014. The governor shall report monthly to the joint committee on health care financing and the house and senate committees on ways and means on the status of the waiver request under this section.

The amendment signals a sea change in the state as even pro-ACA business groups, such as the Associated of Industries in Massachusetts (AIM), have now joined the call for a waiver.

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The AIM President and CEO wrote:

it is discouraging to realize that key provisions of the ACA that were supposed to dovetail with the Massachusetts reform law instead threaten to accelerate the already burdensome cost of health insurance for employers, citizens and a commonwealth that spends nearly half its budget on health care.

He continues by outlining some of the more painful provisions for the state:

• A third-party analysis conducted for the state estimates that a health-care premium tax included in the ACA will cost employers and consumers in Massachusetts $213 million in 2014 and $3 billion during the next decade.
• A provision reducing rating factors used in the combined individual/small business market could increase health-insurance premiums for 60 percent of small companies, according to a Pioneer Institute analysis of Division of Insurance data. Pioneer says that 181,000 small employers could see premiums rise by more than 10 percent and that 45,757 will see increases of more than 30 percent.
• ACA will shift employers with between 51 and 100 employees into the merged health insurance market in 2016, resulting in a small decrease in premiums for employers with 1-50 employees but an increase up to 9 percent for employers with 51-100 employees.
• ACA rules require states like Massachusetts that merged their individual and small-group health insurance markets to set rates only once a year instead of the current quarterly time frame.  Massachusetts employers and consumers have recently benefitted from rate filings that declined from one quarter to the next.
• Although ACA is expected to prompt state lawmakers to eliminate two key employer contribution requirements – the Fair Share contribution created under the 2006 state reform law; and the Medical Security Program, under which employers contribute money to provide low-income unemployed people with health insurance – the state is likely to add an “employer responsibility contribution” of $50 per employee per year to subsidize unemployed people obtaining health insurance either though MassHealth or the Commonwealth Health Insurance Connector.
• A 2.3 percent tax on medical devices that took effect January 1 as part of federal reform will cost one of the commonwealth’s fastest growing industries$411 million a year, according to the Pioneer Institute. The U.S. Senate took a non-binding vote in March to repeal the tax, but Health and Human Services Secretary Kathleen Sebelius told Congress on June 7 that the administration will not support repeal.

This position change is on top of the Boston Globe flip-flopping in its unconditional support for  the ACA in a recent editorial writing, “The Obama administration needs to pay special attention here. Imposing one-size-fits-all regulations on a state that already has universal health … is counterproductive to say the least.”

While the House of Representatives passed the state-federal health care reconciliation bill without the waiver provision, its inclusion in the Senate version would require a conference committee with representatives from both the House and Senate before being sent to the Governor’s desk for signature.

Waiver Would Request No Change in Massachusetts Rating Factors

The impact of eliminating some of the Commonwealth’s current rating factors, a change required by the ACA, and a reality of Massachusetts having a merged market for individuals (84,999 lives) and companies with 1-50 employees (634,085 lives), is a story of some winners and many losers.

In 2014, the ACA will force Massachusetts insurance companies to eliminate the following rating factors when offering insurance:

Factors part of Massachusetts’ 2-to-1 rating band:

• Industry of the employer;
• Participation of employees in the employer’s health coverage; and
• Participation in approved wellness programs.

Factors outside the permissible 2-to-1 rating band:

• Size of the employer group;
• Use of an intermediary when obtaining coverage; and
• Use of a group purchasing cooperative when obtaining coverage.

Leaving  the state with:

• Family composition;
• Ages of the covered members (which may only vary within a 3-to-1 band for adults);
• Tobacco usage of the covered members; and
• Geographic location of the business or the individual policyholder’s residence.

But recent media stories have detailed the state’s plan to prohibit tobacco utilization as a factor. In other words, the state will be left with just three factors, and companies required to report the age of dependents along with their employees.

A recently released Division of Insurance report lays out the damage going forward from the changes.

Premiums will go up for roughly 54% (391,838) of individuals and small company employees in the Commonwealth, and down for roughly 327,246.

Biggest Losers: 60% (377,468) of small employer members will see premium increases due to the rating factor changes.

Increases: 181,000 small employer members will see premiums increase by more than 10%; over 45,757 will see their premiums increase by over 30%.

This battle over federalism is of special interest not only because of the history of health reform in Massachusetts and the parochial local interests behind the outcome, but also because of the political landmines that lay ahead. Furthermore it will be a test of the Obama Administration’s willingness to engage with states that are set to experience double digit rate shock in segments of their marketplace.

http://www.forbes.com/sites/theapothecary/2013/06/26/massachusetts-democrats-to-force-governor-to-seek-waiver-from-obamacare-provisions/