Strike 2 for Massachusetts Healthcare Reform
What is it about the cost drivers of healthcare in Massachusetts that the Governor and the Legislator do not understand? Health insurance company costs make up 10% of the cost of care and have been under a microscope at both the national and state level. Meanwhile, provider and hospital costs, which account for the 90% of cost of healthcare, continues to escalate at alarming rates, all the while unchecked by health reform initiatives. Massachusetts has once again missed an opportunity to try to control provider pricing with new legislation aimed at local insurers and only marginal initiatives focused on through costs of healthcare.
Three years ago Massachusetts passed sweeping healthcare reform legislation which has provided near universal coverage in the state. The reform, however, did little to control costs of insurance coverage and in fact, small business rates in Mass have risen several percentage points above the national average since the law went in to effect. New mandates, taxes, subsidies and plan design requirements have had a negative impact on insurance premiums and small businesses are feeling the brunt of that reform expense.
In August 2010, the state passed several new provisions, stealing a page from the ObamaCare playbook and targeting insurance companies. New loss ratio requirements, inconsistent with the new federal requirements that go in to effect in January, will require carriers to spend 88% of premiums on care. The fact is, all of the Mass carriers already spend just over 90% on care; and federal reform already has a loss ratio requirement ready to take effect. The new law also limits reserve levels that carriers are allowed to hold. Strong reserves are already being taxed by the state to help pay for reform, and those who remember the crisis of under reserved health plans are scratching their heads at the focus on this area.
Three years ago Massachusetts sent a strong message that plans sold in Mass have to meet a minimum coverage level and include some pretty heavy state mandates and first dollar coverages. People who chose to pay lower premiums and assume more out-of-pocket risk were no longer free to do so. Now in an about-face, the state is requiring plans to be offered by insurers that have a limited network and at least a 12% price difference. The legislator has already proven that they don’t know how to control health care spending in Mass and now they are dictating the types of plans they think will control expenses.
Finally, there was a glimmer of hope when the law set to include provision for credits to plans that offered a comprehensive wellness incentive. Unfortunately in a move that can only be seen as politically charged, that credit is only available if you purchase your plan directly from the connector. Too bad.