An Act relative to an affordable health plan

Joint Committee on Financial Services

The Massachusetts Health & Hospital Association (MHA), on behalf of our member hospitals, health systems, physician organizations, and allied healthcare providers, appreciates this opportunity to offer comments in opposition to SB624, "An Act relative to an affordable health plan."

MHA strongly opposes SB624. This legislation inappropriately seeks to achieve reductions in premiums by tying provider reimbursement to already inadequate government payment, by forcing virtually every provider in the commonwealth to accept these rates as a condition of licensure, and by prohibiting providers from negotiating contracts with payers to recoup these losses. The bill fails to recognize the progress being made to transform the delivery system through both voluntary efforts and Chapter 224 regulatory changes.

Hospitals and other healthcare providers recognize that rising healthcare premiums place an increasing burden on Massachusetts small businesses and agree that continued action needs to be taken to give these businesses and their employees relief. To accomplish this goal, we support providing insurance options for small businesses, including moving to alternative payment methodologies (APMs) such as bundled and global payment arrangements. APMs offer incentives that support value, reward high-quality care and offer the most sustainable options for reducing costs and improving health. SB624 is an obsolete proposal that just serves as a distraction to the real work that needs to be done. It appears its primary function is to pass costs on to employees and healthcare providers.

It must be recognized that hospitals are only one piece of the healthcare delivery system and that they are continuing to make strides in reducing costs through numerous quality improvement measures, reengineering, administrative simplification, creation of integrated care organizations, and adoption of APMs. According to CHIA’s 2019 Annual Report on the performance of the Massachusetts healthcare system, the share of members in the Massachusetts commercial market whose care was paid for using APMs actually declined slightly between 2017 and 2018, while nine out of 13 commercial payers reported APM contract arrangements in 2018. Increasing these arrangements is one way to improve care and reduce costs and should be considered instead of sharp payment reductions that will challenge providers’ abilities to develop new and more efficient models of care. Overall, healthcare spending has been growing more slowly, as total healthcare expenditures matched the cost growth benchmark of 3.1%. This bill is problematic in that it regulates output prices without any recognition that providers have limited control over input prices such as pharmaceuticals and medical devices, as well as labor, which alone accounts for nearly two-thirds of the hospital dollar. For Massachusetts hospitals, there would be a significant financial impact based simply on the proposed reimbursement methodology. Artificially reducing payments from managed care payers for this population will further erode operating margins and place some hospitals in serious jeopardy. This doesn’t even take into account the additional administrative costs and bad debt that result from high deductibles.

The bill references a plan that is actuarially equivalent to the lowest-level benefit plan available to the general public within the Connector. The current Bronze health plans insurers offer include too much financial exposure for most people, especially since most do not have a companion requirement of possessing a Health Savings Account. Current Bronze health plan annual deductibles run as high as $3,300 for an individual and $6,600 for a family. Hospital “co-payments” defy the historical co-payment assumptions as they are typically $700-$1,000 for emergency department visits, inpatient stays, and certain outpatient services. The annual out-of-pocket maximum costs for Bronze level insurance are as high as $7,900 for an individual and $15,800 for a family. The downstream effect of high patient cost sharing can be significant when patients are discouraged from seeking necessary care – a very disturbing consequence posed by this legislation.

Healthcare providers also incur the additional administrative burden of collecting from patients after services have been rendered and after health plans process claims and determine a patient's co-insurance/deductible liability. Unlike co-payments, which can be readily available to providers at the time of service, providers are unable to define co-insurance/deductible liability at that point in time. As such, these outstanding amounts are often uncollectable and result in bad debt. Bad debt directly affects patients and local communities when hospitals and other providers are either prevented from appropriately reinvesting in their facilities or are forced to reduce services. Also of significant concern is the prohibition on cost shifting included in this bill, which would prohibit providers from recouping any losses and would therefore compound the effect of government underpayments.

SB624 also requires providers to participate in the Affordable Health Plan. MHA is strongly opposed to any bill that sets fees based on Medicare and forces providers to participate in all health plan products. Instead we support the approach used in Chapter 288’s limited network plans that requires carriers to give providers the option to opt out of any new limited network plan.

Health plans must also be made accountable for reducing premiums through measures other than reducing payments to providers. This is an important point that must be addressed because insurers’ administrative demands drive up medical costs that are embedded in the medical loss ratio. It already has been well documented that cost trends are moderating and many consumers are paying more and more out-of-pocket costs for services. SB624 would ensure that insurers generate a profit while transferring costs to patients and providing no assurance that healthcare providers will be able to cover their costs or that premiums will be reduced. This is neither fair nor sustainable.

MHA fully supports a more efficient, coordinated, and collaborative healthcare delivery system, as well as a fair and affordable payment system. As we do not believe that SB624 achieves either goal, MHA strongly opposes this bill. Because of the many efforts of the healthcare community, legislators, and the current administration, SB624 is an obsolete proposal that would be a step in the wrong direction. MHA urges the committee to oppose this misguided legislation.

 Thank you for the opportunity to offer testimony on this matter. If you have any questions regarding this testimony, or require further information, please contact Michael Sroczynski, MHA's Senior Vice President of Government Advocacy at (781) 262-6055 or msroczynski@mhalink.org