June 2004

All the television advertisements featuring small businesses that local health insurers want to put on the air will not change the fact that small group health insurance is on life support today in Massachusetts.  Indeed we have the distinction of being the most expensive health insurance market for small businesses in the country.  And although we expect high quality health care and choices in this marketplace, we also expect fairness among all purchasers and employers.  Current law discriminates against small employers with 50 or less employees in the Commonwealth.  That discrimination has resulted in higher premium increases year after year for small employers as compared to larger companies.   

It's no secret that small employers pay a premium penalty of approximately 20% more than larger companies—an unfair and severe penalty just for being small.  Those larger employers are often direct competitors of the small businesses, and they are given an unfair cost advantage as they compete for customers.  Even more appalling, the cost disparity keeps getting worse year after year. 

A recent study by the Commonwealth of Massachusetts concluded that the increases in premiums for small businesses and their employees were increasing 13.5% faster than the increases paid by larger businesses over the past four years.  One can reach the conclusion that the health plans are earning their profits on the backs of small business in Massachusetts.   Unfortunately, the lack of adequate competition in the small group marketplace is resulting in unaffordable premiums and higher numbers of the uninsured. 

Small employers simply have no ability to bargain, negotiate or turn down a proposed premium increase.  The ability to negotiate with insurers is a valuable tool larger employers enjoy in Massachusetts, but small employers are prevented by state law from exercising.  In most states, small employers have the right to negotiate collectively for health insurance through professional and trade associations and local chambers of commerce.  These so-called association health plans result in more competition in the health insurance marketplace, small business rates similar to larger companies, and lower numbers of the uninsured. 

At least 27 states allow association health plans.  Participating small businesses in those states enjoy savings from 15-38% over non-negotiated rates.  One example of a successful plan is in the state of Washington, where the Farm Bureau in that state established a plan that not only includes farmers, but also the state retailers association, and 91 local chambers of commerce.  Their group has over 100,000 members, saves 38% on their premiums, enjoys a 97% retention rate, and-- perhaps the most impressive fact--is helping to lower the number of the uninsured in the state.  Indeed, 35% of the new businesses that they write represent individuals who were previously uninsured.

A recent Mass Insight poll in Massachusetts showed that 82% of the public believes that groups of small employers should be able to negotiate for lower health insurance rates through local chambers of commerce, and trade or professional associations.  Common sense would tell you that this right should exist in law for small employers, just as it does for other lines of insurance and other necessary business services, including electricity.

So who would oppose association health plans?  Look no further than those profiting from the current discriminatory, non-competitive marketplace--the incumbent health insurers.  Also opposed are some of the insurer-paid outside administrators, which provide a useful “shopping service” through which small employers can obtain quotes and coverage, but at no real savings.  Most state associations and local chambers of commerce provide the health insurance options and access through one of these administrators.  But a “shopping service” is not enough when premiums are increasing at double-digit rates year after year. 

The Legislature is currently considering House Bill 1699 by Representative Ron Mariano of Quincy.  This bill in on the calendar of the House of Representatives; where it passed unanimously two years ago.

Supporting this concept are at least 35 local chambers of commerce, and state trade or professional associations.  From the National Federation of Independent Businesses, the Massachusetts Farm Bureau Federation, Massachusetts Dental Society, Neponset Valley Chamber of Commerce, and the Associated Subcontractors of Massachusetts, the true voices of small business in the Commonwealth are united behind this legislation. 

There is no more important issue today for small business in Massachusetts than health care costs. The Legislature has a great opportunity to do something that is meaningful for their small business employers, who are the backbone of their communities.  Or they can continue to watch the incessant flow of television ads and think that everything is just fine in the small group marketplace. 

JON B. HURST is the president of the Retailers Association of Massachusetts.