Governor Deval L. Patrick
Testimony Before the Joint Committees on Health Care Financing,
Community Development and Small Business
State House, Boston, MA
Wednesday, March 10, 2010

Governor Patrick testified on behalf of some of the provisions in his Small Business Jobs bill today, specifically mentioning the small businesses around the state who need relief from health insurance premium increases. Below, read his testimony as delivered.

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Address as prepared

Chairwoman Stanley, Chairwoman Forry, Chairman Moore and members of the Joint Committees: Good afternoon, and thank you for promptly convening this hearing on our proposals to limit the rise in health care premiums for small businesses and families.

A woman wrote me from Hopkinton the other day. She told me about her husband's small business located here in Boston. His business's premiums just went up 41.17%. When they called the health insurance company, they were told that premiums increased because the insurer "didn't realize how popular the deductible plans would be and therefore, underpriced that product." She asked me in her letter, "How is a small business to grow and offer other employee benefits with staggering increases year after year?"

The owner of a physical therapy business on the Cape got notice her premium would increase by 35% this month.

In Pittsfield, a broker saw a health insurance premium increase of more than 90% this month.

In Lawrence, a self-employed, single mother's premium increased by 44%. Now, she has to pay the higher premium rather than perform home repairs, for which she had saved for years. In hearings conducted over the past four months by the Commissioner of Insurance, stories like this are everywhere.

Members of the Committee, enough is enough. On the main streets of the Commonwealth, we have an emergency on our hands. We can debate the whys and the hows of health care increases, but the strivers who are investing their energy, their time and their money to help the Massachusetts economy flourish can wait for answers no longer.

We filed our proposals in a Jobs Bill for one reason: Without small business, we will have no economic recovery. Small businesses and sole proprietorships make up 85% of businesses in our Commonwealth. If they don't start hiring, complete economic recovery will elude us. Next to access to capital, soaring health care costs are the consistent reason given for why they can't see their way to add more jobs. Thanks to the recommendations of the Payment Reform Commission, we have a good path to a permanent and comprehensive fix to escalating health care costs. But small businesses and families need help now-as a bridge to payment reform.

We recognize that controlling health care costs is a shared responsibility between insurance companies, providers, businesses and government. But our goal is simple: lower health care costs now, freeing up resources for businesses to hire new workers and spark growth for our Commonwealth. Our bill does the following things.

First, it provides oversight of health insurance company AND provider rates by the Division of Insurance and the Division of Health Care Finance and Policy, respectively. Oversight of the reasonableness of rates charged by both insurers and providers is designed to be a temporary two-year measure that will hopefully exert some downward pressures on escalating health care costs as we continue to move toward systemic changes to our health care payment system. For a period of two years, this oversight triggers a presumptive disapproval for those health insurer and provider rate increases that exceed benchmarks based on the prior year's consumer price index for medical services (2009 medical CPI is 3.2%). These rates would be disapproved, unless there is a compelling reason not to.

Second, the legislation requires the Commissioner of Insurance to examine small business health insurance rating factors and prevent any duplicative or unjustified administrative charges that may drive up costs for small businesses.

Third, the legislation empowers the Commissioner of Insurance to protect small businesses from rate shock caused by drastic increases in premiums driven by changes in the composition of their workforces (particularly the age of their workforces).

Fourth, the bill includes a two year moratorium on the adoption of any new mandated benefits.

Fifth, beginning in July, the bill gives smaller companies the choice of more affordable plans by requiring health insurance carriers in the small group market to offer at least one selective network plan with premiums that are at least 10 percent lower than the premiums for the full network product.

Finally, our package requires insurers to establish bi-annual open enrollment periods for individuals who purchase individual coverage to encourage people to maintain their health insurance.

I have directed the Commissioner of Insurance to require health insurance companies to file proposed increases to small business premiums with the Division of Insurance 30 days in advance of their taking effect (beginning with rates effective with April 1, 2010). Under existing authority, the Commissioner may review and disapprove rates that are excessive or unreasonable. Recently proposed rate hikes announced by the insurance industry-up to 39%-make implementing the emergency measures even more urgent. But we need the Legislature to enact the proposed regulation promptly in order to control the impact on insurers of runaway costs charged by hospitals.

Taken together, these steps will help bring health insurance costs under control for more businesses. They are a jumping off point for what I know is a larger discussion about additional ways we can get a handle on system costs through payment reform. I welcome your ideas. But the most urgent need is for action. We cannot hope that small businesses will start hiring while they are drowning under huge health care increases. I look forward to working with you to meet this important challenge and help create new jobs in Massachusetts.

Thank you again for having me here today. Secretaries Bialecki and Bigby, Assistant Secretary Glen Shor from Administration and Finance, Barbara Anthony, the Undersecretary of the Office of Consumer Affairs and Business Regulation and Joseph Murphy, the Commissioner of Insurance join me here and they will be happy to answer any of your specific questions about our proposals..