Home > Employee Benefits > Obamacare provisions set to hit small business hard

Obamacare provisions set to hit small business hard

massusaIt is discouraging to realize that key provisions of the Affordable Care Act (ACA) that were supposed to integrate with the Massachusetts reform law instead threaten to accelerate the already burdensome cost of health insurance for small employers.  As a result, there is a third ACA-related bill being debated in the Commonwealth that would force Governor Deval Patrick and his administration to file a federal waiver to avoid the adverse effects of rating and rule changes to the Massachusetts merged market (1-50 employees).  The move could lead to some turmoil for the Obama Administration as the ACA seems to be forcing significant changes to a state law that they claimed acted as a model in Washington.

Specifically, the provisions in question are those around the ACA-required changes to rating factors which could have a substantial impact on premium costs for small businesses in the 1-50 marketplace going forward. While the state has known about this for some time, it has been determined by an analysis done by the Pioneer Institute, that we could see extreme premium increases for 60% of small businesses some as high as 50% in the state! As a result, earlier this year, the Patrick administration was able to obtain an agreement that would spread these increases over a three-year period.

The proposed waiver in question is requesting no change to the current Massachusetts rating factors. Currently, the change required by the ACA is to eliminate some of the Commonwealth’s rating factors. Should these provisions stand, we expect there to be many losers and fewer winners. The damage could be substantial as the current merged market is made up of 84,999 individuals and 634,085 lives in small business ( 1-50 marketplace).

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

  • Industry of the employer
  • Participation of employees in the employer’s health coverage and approved wellness plans
  • Size of the employer group

Leaving only the following rating factors in play:

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

In addition for 2014, companies will be required to report the age of dependents along with their employees on their census data. Rates must be calculated on a per-member basis based on age and insurance companies will then be generating a list bill.

A recently released Division of Insurance report highlights the outcomes going forward from the changes:

    • 60% (377,468) of small employer members will see premium increases due to the rating factor changes. We expect that most of the pain will be felt by white-collar firms.
    • 181,000 small employer members will see premiums increase by more than 10%; over 45,757 will see their premiums increase by over 30%.



Commonwealth and other states set to experience drastic marketplace rate changes in 2014 will have to wait and see whether or not the Obama Administration is willing to reconcile with them on these latest provisions. WGA will continue to monitor the status of this bill and report back on future developments.

About the Author

Kerry Hands is a Senior Vice President at William Gallagher Associates in the Employee Benefits Practice, with an expertise in healthcare and healthcare reform targeting high technology companies in the small/midsize market space.

617.646.0387 | KHands@wgains.com | Connect with Kerry on LinkedIn

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