Massachusetts Businesses Pleased with Health Reform

The law, a model for federal reform, increased insurance coverage and minimally impacted business profits.
by | September 10, 2012 AT 10:30 AM

A popular line of attack against the Affordable Care Act (ACA) is that it will be bad for business. But is that true? Well, a case study in comprehensive health care reform already exists in Massachusetts, and a Georgetown University panel concluded Monday that, in fact, the state’s reforms had actually enhanced its economic climate.

Measuring by the most basic metrics, the effects have been profound: 98 percent of Massachusetts residents are insured, including 99.8 percent of children. According to Michael Widmer, president of the Massachusetts Taxpayers Foundation, the percentage of small businesses that offer health insurance has increased from 70 percent to 77 percent since then-Gov. Mitt Romney signed the bill into law in 2006. An estimated two-thirds of the public still express support for the reforms.

The key, agreed a panel discussing the law’s impact on business at Georgetown University Monday, is that state policymakers secured buy-in from all stakeholders -- including, perhaps most importantly, the business community.

“When businesses looked at their expenses and revenues, one expense was growing faster than any other: the cost of health care for employees. They didn’t feel like they had control,” said Rick Lord, president and CEO of Associated Industries of Massachusetts, describing the atmosphere before the law’s passage. “We may have come over on different ships, but we’re in the same boat. They wanted to get in on this early.”

The law did place a number of conditions on employers. They were required to provide “fair and reasonable” health insurance coverage, measured by either 25 percent of their employees enrolling in a plan or the company paying 33 percent of an individual’s premium. Failure to comply would result in a fine up to $295 per employee. As a result, employers saw their costs for employee premiums increase by 9 percent in 2009 and 2010, according to research conducted by the Massachusetts Division of Health Care Finance and Policy.

Some of the criticisms leveled at the ACA have focused on similar provisions included in the federal law, arguing that such costs would adversely affect businesses. However, there are few indications that these additional expenses have had a negative impact on the business environment in Massachusetts, said Linda Blumberg, an economist and senior fellow at The Urban Institute.

“Our research demonstrated very clearly that there is no evidence that the reforms have had any negative impact on employment at all,” Blumberg said. Her organization studied specifically some industries that might feel a greater impact under the law -- small employers or the retail and restaurant industries, which often don’t offer health insurance -- and concluded the same. “In none of these sectors did we see reduced employment,” Blumberg said.

In fact, said Jack Connors Jr.*, a founding partner at Hill, Holliday, Connors, Cosmopulos, Inc., a Boston marketing firm, one of the largest in the United States, businesses could see a benefit when health insurance is “accepted as part of the compensation package for employees.”

“Many business leaders would say we have a competitive advantage,” said Connors, who also serves as chairman of the board of directors at Partners HealthCare System, a major provider in the state..

What about the costs to the state? Much like the ACA, the Massachusetts law required the state government to offer tax subsidies to help individuals purchase insurance. According to research by the Massachusetts Taxpayers Foundation, the health-care reforms have accounted for a 1.4 percent increase to the state budget in the last five years -- a relatively modest increase, Widmer said. And at the same time, the state’s payments for uncompensated care for the uninsured dropped by about 40 percent in the first two years after the law’s passage.

The law hasn’t had all of its desired effects. Medical debt has remained virtually unchanged since 2006, the Boston Globe reported Monday, with 17.5 percent of Massachusetts residents saying they had trouble paying medical bills in 2010. The state also still has the highest per capita spending on health care in the nation. As Governing previously detailed, those issues have led Gov. Deval Patrick and state legislators to get to work on a second round of health reform aimed at controlling costs.

Generally, though, the Georgetown panelists agreed that the law has been a success in its goal of universal coverage, especially considering its implementation coincided with the greatest economic crisis since the Great Depression. Regardless of one’s political persuasions, it has been “a classic case study,” Connors said. “Yet when you look at how people reacted to the national law, it seems like this came from a foreign land.”

It remains to be seen, of course, whether national health reform will play out as well as state-level reform has in Massachusetts. But the state’s experience should give optimism to both sides, said Blumberg, both those focused on insurance coverage and those concerned with economic vitality.

“This was very much a compromise between liberal sensibilities and business sensibilities,” she said. “So the entire perception of the federal law has been shocking to me, because this was really laid out as a moderate approach.”

NOTE: As noted in the comments below, Partners HealthCare System, which Connors serves as chairman emeritus, was subject to a federal investigation in 2010 over antitrust issues for its large control of the market in Massachusetts. According to a New York Times report from last October, the firm has since agreed to lower reimbursement rates, in part to address the concerns raised in the investigation.