State Secures Flexibility to Stabilize Health-insurance Rate Hikes

BOSTON — The Baker-Polito administration announced that the Commonwealth of Massachusetts has secured a one-year waiver from the U.S. Department of Health and Human Services (HHS), authorizing Massachusetts health insurers to maintain the use of small-group rating factors that are permitted under state law, but not aligned with the Affordable Care Act.

The Baker-Polito administration made the request to HHS Secretary Sylvia Mathews Burwell because of concerns that transitioning to federal market rules could cause health-insurance premiums to spike for some small businesses and disrupt the insurance market.

“This is an important step to help small businesses prevent insurance rate hikes for employees’ health coverage,” said Gov. Charlie Baker. “Our administration appreciates this flexibility granted by the federal government to ease costs for small businesses and allow our workforce to focus on bolstering the Commonwealth’s economy.”

In 2013, Massachusetts received a waiver to allow a gradual transition to full compliance with the Affordable Care Act. The waiver recognized the success of Massachusetts’ state health-reform law passed in 2006 — which led to 96.4{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} of Massachusetts residents having health insurance coverage — with latitude to continue certain state insurance practices, such as rating factors permitted under state law. These state rating factors offer insurers greater flexibility to price insurance plans according to the traditional practices of the Massachusetts market, preventing disruption in pricing.

The original waiver, as extended in later years, allowed small-group insurers to continue to use two-thirds of the state rating factors in effect in July 2013 through Jan. 1, 2017, after which rating factors would be reduced to one-third until Dec. 31, 2017 and phased out entirely on Jan. 1, 2018.

Under this agreement, brokered by officials from the Executive Office of Health and Human Services, the Executive Office of Administration and Finance, the Health Insurance Connector Authority, and the Division of Insurance, Massachusetts small-group insurers can continue to use one-third of the state rating factors in effect in July 2013 through Dec. 31, 2018.