BOSTON—A Massachusetts health care bill that would force insurers to spend almost 90 percent of their premium revenues on medical care instead of administrative costs awaits Gov. Deval Patrick's signature.
Patrick has said he supports the compromise legislation, hailed as a way to help consumers and small businesses combat rising health care costs. Legislators gave the bill final approval Saturday, the last day of the session.
The legislation strengthens the state Division of Insurance's ability to reject health insurers' proposed rate increases. Insurers would have to prove that no less than 88 percent of premiums goes toward paying for medical costs when filing rate increase requests. Otherwise, the requests will be rejected.
Eric Linzer, a spokesman for the Massachusetts Association of Health Plans, made up of insurance companies, said the provision was an improvement from the current approach.
"Ultimately, what we need to be doing is getting at the underlying costs because the bulk of the premium dollar goes to medical care," Linzer said.
The Massachusetts Hospital Association said the provision will be helpful to consumers.
"We want as much of the premium dollar going to care, not to red tape and administrative costs," said Tim Gens, the MHA's vice president and general counsel.
The Patrick administration this year rejected 235 of 274 premium hikes proposed by insurers for the April-to-June period, before reaching settlements with some of them.
Under the legislation, small businesses with less than 50 employers could form cooperatives to strengthen their purchasing power and health insurers would have to offer plans with low-cost health care providers in their networks.
Jon Hurst, president of the Retailer's Association of Massachusetts, said the bill will enable small businesses to obtain premium prices that large employers use their market clout to secure.
"This is the most important reform small businesses have seen in 20 years designed to give them and their employees' health insurance premium relief and equal rights under the law and in the marketplace," Hurst said.
Backers of the bill say it will accommodate consumers who don't want expensive comprehensive network plans and could help reduce premiums for consumers and businesses by 10 percent.
"This reform helps tens of thousands of people who can't afford insurance," said Sen. Mark Montigny, the lead Senate negotiator on the compromise bill.
Rep. Ronald Mariano, the lead House negotiator, said a requirement under the bill that insurers factor in age every year instead of every five years will smooth out rate increases.
"The increases will be more reasonable and you can plan for them and handle them in your budget a little easier," Mariano said.
Another provision limits the number of open enrollment periods in which consumers can purchase insurance. The legislation calls for two open enrollment periods in 2011, and one every year thereafter.
Georgia Maheras of Health Care for All, a consumer advocacy group, said the problem arises when a person purchases health care before needed medical procedures and then drops coverage once the procedure is completed, increasing costs for the whole system.
Absent from the final bill was a Senate provision that would have generated $100 million through an assessment on hospitals. Senate negotiators said the House would not go along with the assessment.
Montigny said the bill sets the stage for future efforts to help consumers and small businesses afford constantly rising health care costs.
"All parties are on notice that we will be squeezing costs and taking away the free lunch on consumers," he said.
