Patrick vows ‘soft cap’ on health premium hikes
Echoing President Obama’s call to shore up small businesses, Gov. Deval Patrick says he is instituting a “soft cap” on health care premium hikes at companies with fewer than 50 employees.
Patrick, looking to stem years of double-digit premium increases, will require insurance carriers for small businesses to seek approval from the Division of Insurance for any hike that exceeds medical cost inflation, currently pegged at 3.2 percent.
“Any increases significantly higher. . .will be challenged,” Patrick said Wednesday at a forum sponsored by the Greater Boston Chamber of Commerce. “This is aggressive, but we have to give small businesses some economic breathing room until we can implement the kind of payment reform that will curtail costs across the health care system.”
Dispelling any whispers he might not be up for the 2010 campaign fight, Patrick’s proposals are a stern shot across the bow of Republican Charlie Baker’s ship. Health care rate deregulation was implemented under former Gov. William Weld with Baker as his undersecretary of Health and Human Services. And under Baker, Harvard Pilgrim Health Care, like most other insurance carriers, had rate hikes for small businesses that hit double digits.
According to the Division of Insurance, premiums over the past five years for small businesses have risen between 8 percent and 12 percent on an average annual basis. The division’s 2008 Annual Report shows Harvard’s increase for that year for small groups was 9.2 percent to 12.2 percent.
Lenny Alcivar, Baker’s campaign manager, dismissed Patrick’s plan as “a woefully deficient election year ploy.” Alcivar said Baker defers to no one when it comes to health care reform.
“Small-business owners know that while the governor was overseeing double-digit spending hikes, Charlie Baker was overseeing the turnaround for what has become a health care company that has become the No. 1 provider for clinical effectiveness and customer satisfaction five years in a row,” Alcivar said. “When it comes to health care reform, Charlie Baker won’t have to be forced into a conversation because of a reelection campaign.”
Former Republican state party chairman William Vernon, now Massachusetts director of the National Federation of Independent Businesses, said Patrick’s proposals are fine for the “short term” but still don’t address the overshadowing problem of costs.
Vernon said it is difficult to gauge average hikes because the size of companies and the insured pool varies so widely, but he said that, for this year alone, the premium increases his members have relayed to him range from 10 percent to 30 percent for the estimated 1 million employees of the state’s small businesses.
Vernon, a former state representative from Mansfield, said there’s no silver bullet” when it comes to health care. “We did health care reform in Massachusetts in 2006. We didn’t do costs. That’s the problem now. It’s always been the problem.”
Patrick acknowledged his “friends” in the health care industry might be distraught at the proposal. “I saw the color drain out of their faces,” Patrick quipped.
Some at the breakfast forum took a more skeptical approach. “I’m not sure this proposal will stop small business premium increases because premiums reflect the cost of hospital services,” Lora Pellegrini, acting president of the Massachusetts Association of Health Plans, said. “Until that’s fixed, you can’t lower health-care costs.”
Patrick’s feisty address to the Chamber members sounded like a cross between a campaign speech and a sunny State of the State address. The governor listed his administrations accomplishments ranging from “tough decisions” on budget cuts to ethics and lobbying reform to instituting managed competition for auto insurance. But he saved his specifics for the small business proposals, clearly near and dear to the hearts of the majority of attendees.
Patrick, who last week skipped a union forum because of planned police pickets, announced a $2,500 tax credit to small businesses that create a new job and keep the position for at least one year. He said the credit would be capped at $50 million and be distributed on a first-come-first-served basis, paving the way for what he estimates would be up to 20,000 new jobs.He also announced a freeze on unemployment insurance at 2009 levels, saving businesses an estimated $391 million, roughly $158 per employee. In addition, Patrick will establish a $40 million Growth Capital Fund as a “one-stop shop” for financing and technical assistance needs for small businesses.
“Small businesses account for 85 percent of Massachusetts businesses, and for them this is an economic emergency,” Patrick said. “If we want new jobs, we need to focus special attention on meeting their needs.”