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Small businesses are taking the rap on health care costs

February 26, 2019 by Jon Hurst, RAM President

When it comes to health care in Massachusetts, there’s good news and bad news. The good news? The state recently announced that individuals who buy health care through the Health Connector, our health care exchange, pay the second lowest premiums in the country. The bad news? According to the Massachusetts Health Policy Commission, small businesses and their employees in the state have the second highest premiums in the country.

At first blush, the disparity doesn’t make a lot of sense. After all, Massachusetts has some of the highest health care costs in the nation. But the reason for the discrepancy is straightforward enough: Small businesses are effectively subsidizing individual health care premiums in Massachusetts. Employees of small businesses are required to pay more than their fair share so individuals can pay far less.

And it’s about to get worse. Next year, small businesses in Massachusetts with 50 or fewer employees will receive no pricing adjustment for purchasing health care in bulk for their employees, their lower administrative costs, or the fact that their employees are actuarially a better risk compared to individuals. And to go along with those unaffordable premiums, most of these employees will be forced into high deductible plans, joining the nearly 60 percent small-business level already seen, which requires sharing more of the cost with their employer compared with government and big-business work settings.

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January 2, 2019 by Jon Hurst, President

As we celebrate the New Year and look optimistically at the future, many small business owners are facing 2019 with fear for their profitability, given new state payroll mandates on wages and paid leave.

Effective January 1, small businesses saw the increased mandated payroll costs of a $1 minimum wage hike.  This increase is on top of a $3 increase which was just fully implemented two years ago, and is the first step of a $4 increase over 5 years.  Together, the $7 hike over 9 years represents an 88% increase over a period of time in which the cumulative inflation rate is unlikely to exceed 20%. But it isn’t just the wages of new employees, it’s the compression effect of higher wages right up the ladder, along with the mandated Social Security, Unemployment Insurance (UI) and workers compensation premiums that come with it.  And on July 1, those payroll taxes will also include a new state family and medical leave tax on employers and employees alike.

In the day and age of the smartphone, you can’t just raise prices to cover these new costs and expect consumers to still pay you for your goods and services when they can buy anywhere.   So to balance out the new mandated payroll costs, Beacon Hill should do the following in 2019 to ease costs:

  1. Fix the Small Business Health Insurance Crisis.  Massachusetts has the second lowest individual premiums, yet the second highest small business premiums in the country.  At the same time large employers pay far less for far better coverage than do small employers.  That is shockingly unacceptable, and is due to discrimination under the law and in the markets. 
  2. Close the Loopholes In The UI System.   Massachusetts is ranked 50th by the Tax Foundation for unemployment insurance systems.  In short, employers and employees alike abuse the system due to an inadequate eligibility system.
  3. Prevent Local Ordinances Affecting Consumer Choices.  Many states by law prevent local ordinances affecting interstate commerce, but MA does not.  So a patchwork on tobacco sales, plastic bag usage, water bottle sales, etc., has emerged across the state due to organized special interest group efforts before 351 cities and towns.  These affect local stores, but unfortunately not the new Internet competition.  For consumer choice and small business competitive reasons, require statewide standards for consumer product sales. 
  4. Pass a Teen Wage.  Thirty-nine states have them.  Let’s make sure 14-17 year olds have the learning and earning opportunities they need, and small businesses have the incentives to hire them.

Small Business Health Premiums Keep Rising More Than Others; RAM Seeks Regulatory Fairness

September 24, 2018  by Jon Hurst, President

Recently, the Massachusetts Center for Health Information and Analysis (CHIA) presented their 2018 Annual Report. The report was widely reported in the press for showing much slower overall growth in healthcare spending: 1.6% vs. the state’s 3.1% benchmark, and recent 4 year average of 3.6% increases. Yet, totally missed by the press and general public was how the increased costs were disparately distributed among a wide variety of consumers. Dissecting how the overall healthcare “pie” is divided is extremely important for small businesses, as important questions remain whether costs are being fairly distributed across all classes of purchasers.

Commercial, fully-insured premiums increased 4.9%, yet within that market, small businesses saw an increase of 6.9%. Subsidized individuals in the Connector saw a 3.0% increase, unsubsidized individuals saw a 3.8% increase, large groups saw a 4.1% increase, and the state Group Insurance Commission (the GIC; the buying group for state & local employees) saw a 4.4% increase. Meanwhile the state’s Medicaid program saw a drop of -0.2%.

But just looking at the disturbing and unequal premium trends isn’t enough, you also need to look at cost sharing and high deductible plans as you compare the fairness of the markets. Besides seeing a far higher than average premium increase than individuals and large groups, small businesses and their employees saw a greater increase in cost sharing and high deductible plan growth than other market sectors. While 28.2% of the commercial market are now in high deductible plans, 57.5% of small businesses are in that cost sharing space, while the state’s taxpayer funded GIC is at 0%.

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May 17, 2017  By Jon Hurst

As the fiscal year 2018 state budget gets closer to implementation on July 1, it is becoming clearer that employers will be asked in some way to help fund a state Medicaid budget gap.  The MassHealth budget has exploded under a combination of ACA related costs, mixed up consumer incentives, and a lack of provider expense control.  And until the state can institute some guardrails, and move some over to more appropriate and affordable options, it appears that employers will be asked to fund some of the increased costs over a two year period. 

Important discussions on the economic impact to small businesses have lowered the dollar ask and have allowed for discussions of better taxing plans, but still absent from the negotiations is skin in the game from the providers themselves.  A proposal to cap commercial rate increases for the big, high cost providers was lost in the flood of unparalleled political power by “non-profit,” non-taxpaying healthcare providers.   They aren’t shy about asking for more money from consumers, employers and taxpayers, but ask them to pay taxes or reduce their expenses, and they pull out all the stops to deflect the conversation.

Some of these providers are among the largest employers in the state, are far wealthier than most “for profit” employers, yet due to their tax status, they pay no corporate income tax, no commercial property taxes, and incredibly, no sales tax.  With their direct tax avoidance they force the rest of us to pay more in taxes.  More taxes, on top of uncontrolled, escalating health insurance premiums.    

Furthermore, they are arguably given by government an unfair advantage under those tax laws compared to their for profit competitors.  Taxes are supposed to not only fund important government services like healthcare, but also create fair playing fields, and incentives to do the right thing.  Truly there is nothing like paying taxes to force you to closely examine your expenses and behavior.  And ideally the tax system should be set up to make sure everyone is treated fairly and equally by government. 

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Healthcare Is An Expense Problem, A Law Problem, Not A Revenue Problem

January 26, 2017 by Jon B. Hurst, President

ObamaCare (ACA) is under the microscope for repeal and replacement this year in Washington DC.  And here in Boston, yet another state commission on healthcare provider prices is grappling with the fact that in the 11 years since we passed RomneyCare, our healthcare costs have annually increased about 4 times the rate of inflation.  Unfortunately for Main Street, those increases haven’t been spread equally either—small businesses and their employees have seen far higher premium increases than those experienced by big business or big government programs. 

Despite a good economy, these are troubling times in Massachusetts due to the interwoven healthcare cost issues affecting employers, consumers and taxpayers.   

Local small businesses, employees and consumers have seen their premiums rise far faster than their sales and family incomes.  RAM members have reported average annual premium increases of 12% each year over the past decade.  Likewise, state government has seen their costs for subsidized commercial and Medicaid plans under ObamaCare rise as well, as a significant number of consumers have made the ACA incented, financial decision to take the very generous, low cost, taxpayer subsidized options through the Connector. 

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APR. 3, 2015 • BY JON HURST

For more than a decade since the debate and passage of Chapter 58—or “RomneyCare”—RAM has made it a top priority to seek health insurance marketplace equality and legal fairness for small businesses and their employees. Numerous state reforms created opportunities for that fairness in premiums, including the passage of legislation authorizing small business cooperatives. But a combination of overbearing and preemptive federal rules under the ACA, as well as an explosion of state health insurance mandates have created the most costly and unfair market, and economic stifling environment for small businesses in recent memory. The bottom line is that the employees of small businesses are in effect second class consumers under the law and in the market for health insurance. The unfair levels of cross subsidies, the rising premiums, and the inequality in choices in coverage are little understood, yet are very real and very discriminatory.

RAM’s annual member survey of premiums for 2015 showed an average increase of 11%, and that is on top of an identical 11% increase last year. Those levels of increases simply are not occurring for big business or big government risk pools. No one can convince me that the employees of small businesses are less healthy than those receiving taxpayer supported coverage, or those working for big, self-insured employers. It is time to educate our state and federal leaders to this discrimination and this threat to our small businesses. Small employers compete every day for both customers and employees with big business. It is one thing for government to say small businesses must provide insurance, and their employees must purchase insurance. But to do that and then require far more expensive and extensive coverage than what exists for others means that we have a government rigged system.

Please take a few moments to click here and review the results of our annual survey, and join RAM in educating your state and federal elected officials on this most urgent of cost issues.