Written Testimony of
William C. Rennie, Vice President
Retailers Association of Massachusetts

Before the Joint Committee on Health Care Financing
November 2, 2009

Re: S.2170 - An Act Relative to an Affordable Health Plan
 
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The Retailers Association of Massachusetts (RAM), established in 1918, is a statewide trade association of over 3,100 member companies.  Our membership ranges from independent, “mom and pop” owned stores to larger, national chains operating in the general retail, restaurant and service sectors of the retail industry.  The industry’s contributions to the Commonwealth include over $112 billion in annual sales; over $5.7 billion in annual sales and use taxes collected; 17% of all Massachusetts jobs; and operations in over 38,000 locations across the state.

On behalf of the membership of RAM, I urge you to support S.2170, An Act Relative to an Affordable Health Plan, which seeks to create a new insurance product for businesses with 50 or fewer employees. 

For small employers across the Commonwealth, as they have watched their health insurance premiums skyrocket over the years, no issue is of greater concern.  Out of control premium increases continue to hamper any efforts made to promote new job growth and profitability for small businesses.  While most have focused recently on the overall system cost increases, we feel that more attention should be paid to the equally important issue of premium disparities across purchaser size and type.  Small employers are looking at prices of a family HMO plan this year often in excess of $22,000.  Large employers, both big business and big government, have not seen increases anywhere near these levels.  This creates an unfair competitive marketplace for small versus large companies.  For all of these reasons the Division of Insurance (DOI) recently announced a series of hearings and informational sessions aimed at further examining the problems faced by small business and RAM is supportive of those efforts.

Again, reform is needed to ensure that our small, local employers are being treated fairly and that they have all the tools before them necessary to lower their health insurance costs.  We believe that the Affordable Health Plan can be an important tool in the small business owner’s toolbox, one of many we hope, that can help to address today’s cost issues.  And while a product such as the one proposed by this legislation could be a perfect fit for many small employers, it may not be right for everyone.  For that reason, we continue to support other efforts in addition to this proposal, to further highlight the needs of small businesses.  One such effort is the push to allow small businesses the ability to group together to purchase and save on health insurance coverage (H.3452, An Act Relative to Small Business Health Insurance).

Unlike larger businesses and government entities, such as the Commonwealth’s Group Insurance Commission (GIC) and cities and towns, small employers are not permitted under current law to group together to group buy and increase their buying clout.  This is a normal process in other states and was legal in Massachusetts up until 1996.  In fact, certain group buying cooperatives were grandfathered in under the changes to the law in 1996 and continue to flourish today well over a decade later, saving their members and the employees of those members significant health insurance premium dollars.  However, for all of those not grandfathered in, it is no coincidence that those small employers have seen double digit premium increases nearly every year since their group buying and negotiation ability was eliminated via Chapter 297 of the Acts of 1996, the Small Group Reform law.

Massachusetts “non-profit” health insurers are enjoying a period marked by hundreds of thousands of new subscribers and increased profitability, while still hitting small businesses with double digit increases.  The facts are that our “non-profit” health insurers reimburse hospitals and providers the same amount for the same procedure no matter whether you are a large employer, small employer or a purchaser of a state subsidized health plan.  Given this fact, on an average basis premiums should be relatively equal, or certainly within hundreds and not thousands of dollars.  But they are not. 

For these reasons, we believe that the Affordable Health Plan proposed in S.2170, as well as a proposal such as the solution offered in H.3452, or some other model allowing group purchasing for small employers, are important compliments to Chapter 58 in seeking to control costs.  Flexibility in choice and product design and the ability to group purchase are essential to the future success of our small Massachusetts employers.

As we now require all individuals to obtain and carry health insurance, we need to make every effort to ensure that we are all on a level playing field.  We need to resolve the disparity in health insurance costs between small and large employers and give our small businesses and small non-profits equal access to the tools that we allow big business and governments to employ.

I respectfully ask the Committee to please support S.2170. 

Thank you.