Patrick-Murray Administration's Division of Insurance Issues New Health Care Cost Containment Regulations for Purchasing Cooperatives and Select Network Plans
Allows small businesses to combine market power, requires carriers to offer selective or tiered network plans at least 12 percent less than 'regular' plans
"By being able to join together in cooperatives, small businesses will maximize their health insurance buying power and this should help to reduce premium costs for the individual businesses," said Barbara Anthony, the Undersecretary of the Office of Consumer Affairs and Business Regulation. "This is another tool available as we work on lowering the costs of health care for small businesses and working families."
The regulations allow for the creation of six cooperatives serving up to 85,000 people. They are expected to go into effect in April and will establish a process for organizations to file to be certified as one of the six cooperatives. After the Division certifies the six cooperatives, insurance carriers will be required to develop products that are designed by the cooperatives, which may be available by late summer.
"The Patrick-Murray Administration's action creating health insurance purchasing cooperatives is an important step in reducing the crushing impacts of spiraling health insurance premiums on small businesses," said Bill Luster, Executive Director of the North Shore Alliance for Economic Development, and an early and strong supporter of the new legislation. "Right now small companies are the job creators but in many cases they are severely hampered in their ability to grow or even maintain their current number of employees because of the burden their insurance premiums place on their company. This new option of group purchasing will offer an additional option."
"Thousands of small businesses across the state are holding out hope that these cooperatives will give them buying clout, education, financial incentives to get healthier and be better consumers, and that all of these factors and efforts will result in lower premiums," said Jon B. Hurst, President of the Retailers Association of Massachusetts. "We are truly appreciative of Governor Patrick's efforts to work towards comparable coverage for comparable premiums for small businesses in the Commonwealth. It is vital for their survival and for job growth in the state."
The package of regulations also requires carriers to offer selective or tiered network plans that cost 12 percent less than "full-network" plans. These discounted plans will still offer access to quality services while providing a smaller pool of providers or higher co-payments for care received from certain network providers. Other regulations filed earlier this month will create a more robust rate-review process, change open enrollment rules, and create rate restrictions that will smooth out rate shocks on small businesses. Earlier this month, Blue Cross Blue Shield announced a new tiered network plan with lower-cost alternatives had attracted hundreds of small businesses in just one month, illustrating the demand for these products.
"These regulations will give small businesses and working families new options through group purchasing cooperatives and reduced network plans that will help them maximize benefits and cost savings," said Joseph G. Murphy, the Commissioner of the Division of Insurance. "We continue to work on reforms that will put the brakes on high increases, and we continue the dialogue with all stakeholders, including carriers and providers, and as we create long-term solutions to this issue."
With close to 98 percent of our residents insured, Massachusetts leads the nation in health care coverage, and the Patrick-Murray Administration is focused on containing costs so that health care is as affordable as it is accessible. Last year Governor Patrick directed the Division of Insurance to create a more robust base-rate review process that has lowered proposed increases by carriers and saved small businesses more than $100 million. Governor Patrick also signed legislation in 2010 to allow for group purchasing cooperatives, select or tiered network plans, and enhanced financial and rate information from carriers. In addition, the Commonwealth Health Connector has initiated a new procurement effort that seeks to achieve cost savings in Commonwealth Care - the state subsidized health plan for low-income residents - by encouraging competition and innovation among health plans, enabling it to accommodate additional membership in Fiscal Year 2012 without adding to the bottom-line cost of the program.
For more information on the Division of Insurance and health insurance costs, visit www.mass.gov/doi. The website includes stories from small-business owners struggling with insurance costs, and source information including testimony from Division's hearings across the state. The Division of Insurance is an agency within the Office of Consumer Affairs and Business Regulation. Follow the Office at www.mass.gov/consumer, its Consumer Connections Blog and at its Twitter feed, @Mass_Consumer.