NFIB State Director Letter to Conferees
July 12, 2018
Small business owners in Massachusetts have traditionally ranked the price of health insurance at or near the top of their list of concerns for over a decade. The price tag of healthcare in the Commonwealth is a significant cost of doing business and a significant consideration when creating a new job. Unfortunately, health insurance expenses continue to increase annually and efforts to manage cost increases seem to always fall short of expectations.
We appreciate the Legislature’s willingness to conduct much-needed discussions on such a complicated and relevant subject matter. But for small businesses it all boils down to one question: Will this legislation lower cost?
Earlier this year, NFIB conducted a very unscientific poll asking our members whether they will see their health insurance premiums increase, decrease, or stay the same for 2018. The vast-majority of respondents replied they would experience an increase and we calculated the average premium increase for 2018 to be about 12%. But these increases come as no surprise as most of our membership experiences double-digit premium increases annually. While the increases have become routine, they are no less painful for struggling small businesses. These premium increases were in stark contrast to reports of GIC covered individuals experiencing 0% premium increases, and in some cases, even receive premium reductions. The notion of 0% premium increases and rate reductions are simply unheard of for small business owners in the Commonwealth.
Creating new assessments as a healthcare funding solution will lead to additional premium increases for small employers and their workers. Assessment costs always end up passed along to consumers. House Bill No. 4639 creates a significant new assessment that will no-doubt be reflected in the premiums of small businesses and their employees. As most Main Street businesses already experience double-digit premium increases, layering on further premium increasing assessments will make providing health coverage even more unaffordable for small employers.
Senate Bill No. 2573 also fails to lower costs in its current form. This piece of legislation institutes a provider rate floor to address price variation that may lead to unchecked, perpetual rate increases without a rate ceiling. The bill also includes a provision to study the notion of single-payer healthcare for Massachusetts, an experiment that the state of Vermont had to abandon due to unsustainable costs. If a small, low population state like Vermont could not afford the price tag of single-payer healthcare, Massachusetts surely cannot find the money for this budget-busting proposal without major tax increases.
Solutions to the health insurance cost crisis for small businesses and their workers who shoulder the premium costs are often difficult to implement. Rather than assessments and perpetual cost increases by setting a price variation rate floor without a ceiling, the answers should include more transparency for consumers, giving them more choices and providing more competition, not less. NFIB is strongly in favor of more free market solutions to lower cost through competition and choice. Government must seek ways to instill competition into healthcare by reducing mandates. Many medical procedures are not emergencies and consumers can be given information that allows them to choose the best care and the most cost-efficient care. These are the types of cost solutions that should be included in healthcare legislation.
One major component that remains noticeably absent from both House Bill No. 4617 and Senate Bill No. 2573 is the effort to reform MassHealth. We must emphatically reiterate the need for substantive reforms to rein-in the ever-expanding MassHealth budget. In 2017, Governor Baker signed into law a new tax on employers to fund a ballooning MassHealth budget. At that time, Governor Baker explained reforms would be addressed in a later legislative package. Now, almost a year later, both Senate and House healthcare bills neglect to address these much-needed reform efforts.
The EMAC tax is having an extremely negative impact on unsuspecting businesses owners. Employers first discovered last Spring that they are responsible for an assessment on a portion of their workforce that utilize state subsidized health coverage. In many cases, it was only when the employer received their assessment notification that they were made aware of which workers received subsidized coverage. The assessments, ranging from small sums to tens of thousands of dollars in fines, served as a shocking surprise for many job creators in the Commonwealth.
Small business owners have voiced their concerns to their elected officials prompting two unanimously passed amendments in the Senate FY19 budget debate. These amendments recognize the negative effect of the new EMAC tax and are currently being considered in the conference committee negotiations. Amendment #351 prevents an employer from being assessed on both the state MassHealth assessment and the federal employer shared responsibility payment in the same taxable year. Amendment #589 allows for non-profits, high turnover firms, and small businesses to seek a hardship waiver, however the definition of hardship has yet to be defined.
What makes the situation increasingly urgent is the need for substantive MassHealth reforms to prevent increased state health spending. While we understand Massachusetts has s a healthcare cost problem, almost all states that chose to expand Medicaid have similar issue, alarm bells should be sounding at spending over 40% of the state budget on health care while subsidizing healthcare for nearly 30% of the state’s residents. The proportionally imbalanced cost of healthcare in the state budget prohibits spending for education, social services, the environment, public safety, public works, and every other line item. Small businesses are justifiably concerned that refusing to enact any sort of MassHealth reforms could lead to Massachusetts’ employers serving as a continued revenue source beyond 2019. In order to address the underlying MassHealth cost drivers and the hefty EMAC fines assessed on businesses, a comprehensive solution is needed that provides both relief to employers and reins-in state spending.
Many of the EMAC assessments are being levied on employees who rejected an employer’s offer of insurance because state offerings are more attractive. Employers cannot compete with the generosity of the state plans nor the overall cost, with the result being a perpetually increasing MassHealth budget. Employers cannot mandate employees accept employer sponsored health coverage yet end up being punished for the wise consumer decision of the employees.
While I am hopeful the budget conferees adopt the two pending EMAC-related amendments, further action must occur to end the extreme cost burden of this new tax:
Quarterly EMAC Assessment Cap: Tier 2 of the EMAC assessment should be no more than $187.50 per quarter. This will benefit the many seasonal businesses forced to pay the $750 fine for simply hiring summer or seasonal help. If left at a whopping $750, an employer may rightfully reconsider hiring summer/season workers who may trigger the Tier 2 assessment. To encourage seasonal and summer job creation, a quarterly Tier 2 cap of $187.50 should be implemented to prevent the full assessment fine of $750 on seasonal jobs.
90-Day Waiting Period: Under current law, an employer is subject to the assessment for employees receiving MassHealth or subsidized Connector Care coverage for a period of at least fifty-six days. Small businesses provide the vast majority of jobs in the Commonwealth and their hiring practices vary on a business-to-business basis. A standard practice in most businesses is a waiting period prior to qualifying for employer sponsored health coverage. This time period often determines whether the new hire is an appropriate fit for the position. Under this law, new employees still in the probationary work period trigger Tier 2 of the employer assessment. Some industries, restaurants in particular, have exceptionally high turnover in the first 30-60 days of work and may end up paying two assessments on the same position. Fifty-six days is far too short a time period, resulting in hefty fines for some high turnover businesses. We encourage the legislature to expand this period of time from fifty-six days to a more realistic 90-day time period.
Early Sunset of the EMAC Tax: Due to the EMAC tax proving a major burden for businesses, stifling both job creation and economic growth, we ask that this assessment end before the final quarter of 2019 as written in the current law. The EMAC tax must either sunset after Quarter 2 of 2019 or when a revenue threshold of $400 million is met. When first introduced, the EMAC proposal was intended to generate $200 million per year for 2018 and 2019 to fund the growing MassHealth budget gap. An early sunset triggered by either a revenue threshold being met or the end of Q2 would be a welcome gesture for the small business community.
Among Massachusetts healthcare reform efforts, costs have always been second to quality of care and access to insurance, but it is time to recognize that cost is the biggest barrier to care. Small businesses can no longer endure annual double-digit premium increases. Much like the Commonwealth is experiencing, healthcare expenses are also devouring small business budgets and crowding out revenue to grow, hire and expand. For the sake of the economic well-being of Main Street businesses across Massachusetts and their workers, any healthcare bill released by this conference committee should lower costs. This means no new assessments and no rate floors that will lead to a never-ending series of escalating costs.
Christopher R. Carlozzi
NFIB’s Massachusetts State Director