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Human Resources: Massachusetts Payment Reform Implications

By September 25, 2012February 19th, 2015No Comments

<business_man_shirt_tieThe Massachusetts Payment Reform Law has implications for business human resource management.  Here are the key provisions that will impact you:

Massachusetts Payment Reform
 Chapter 224 of the Acts of 2012

Effective Date
: The bill is effective on November 4th (90 days following the signing) unless the sections have separate effective dates. Comments and technical corrections on a number of these provisions are still pending.

Key Provisions for Brokers and Employers
: Mass Payment Reform has nine key provisions:

New Agencies and Powers
  2. Disclosure and Transparency
Small Group and Cooperative Rating Requirements
  4. Assessments
  5. Health Care Cost Growth Benchmark
  6. Market Power and Provider Price Variation
Alternative Payment Arrangements
New Requirements for Provider Organizations and ACOs
  9. Wellness Initiatives

New Agencies and Powers

Two New Agencies were created:
The Health Policy Commission (the Commission) and the Center for Health Information Analysis (the Center).

The Commission is similar to the Connector Board. It is an independent public entity governed by an 11 person board of state officials, health policy experts, and business, consumer, and labor representatives. 
The Commission oversees the overall implementation of health reform, enforces compliance with cost targets, and conducts market impact reviews.

The Center collects, analyzes and reports data on premium levels and cost trends.

New Powers for the Attorney General:
The law directs the Attorney General to monitor trends in the health care market including provider consolidation and payer contracting trends.
It allows the Attorney General to investigate provider organizations referred by the Health Policy Commission to determine whether the organization engaged in unfair methods of competition or anti-competitive behavior and take appropriate action.
Disclosure and Transparency

Treatment Cost Estimator (estimated effective date October 1, 2013)
Health plans must establish a toll-free telephone number and website that provides consumers with an estimated or maximum charge for a proposed admission, procedure or service, and the estimated amount the member will be responsible to pay within 2 working days.

Members cannot be required to pay more than the disclosed amounts for the covered benefits that were actually provided.

The law requires carriers to alert members that the actual amount the member will be responsible to pay may vary due to unforeseen events.
Other Disclosure and Transparency Provisions for Health Plans (estimated effective date October 1, 2013 for EOC, EOB and standardized Prior Authorization forms)

  • Expands the information that must be disclosed to the member in the Explanation of Coverage (EOC)
  • Requires use of a standard Explanation of Benefits (EOB)
  • Requires TPAs to disclose to their self-insured groups the contracted prices for services provided by in-network providers
  • Directs the Division of Insurance (DOI) to develop standardized and electronically available prior authorization forms
  • Seven day turnaround for Utilization Review (UR) decisions regarding medical necessity

Small Group and Cooperative Rating Requirements for:

  • Medical Loss Ratio (MLR): Phases down the current state 90% MLR for individual and small group plans to 89% as of April 1, 2014 and then down to 88% on April 1, 2015. It’s important to note that these are the highest levels in the nation.
  • Limited and Tiered Network Rate Differential: Increases the base premium rate discount for tiered or limited network products from 12% to 14%
  • Group Cooperating Rating Advantage: Expands rating flexibility for small group cooperatives by allowing a discount up to 10


  • Assesses a one-time $165 million fee on health plans, including self-insured and self-funded plans
  • Also assesses a $60 million fee on certain acute hospitals
  • The fees will be paid to distressed hospitals, used for prevention and wellness, and for expansion of electronic medical records
  • The health plans’ share will increase from 10% to 33% to fund the 2 new agencies created by the law
  • Health plans and providers are not permitted to seek an increase in rates to pay for the assessment

Health Care Cost Growth Benchmark

  • The law establishes a health care cost growth benchmark to limit health care spending. Through 2017, health care spending may grow no faster than the overall state economy (“potential gross state product”).
  • From 2018 through 2022, spending must slow further to .5% below the growth of the state’s economy.
  • After 2022, the health care cost growth benchmark will revert back to the growth rate of the overall state economy.
  • Beginning in 2016, if the annual change in total health care expenditures exceeds the previous year’s benchmark, the new agency must establish procedures to assist health care entities to improve efficiency and reduce the cost growth through the implementation of performance improvement plans.

Massachusetts is the only state to establish a cost target.

Market Power and Provider Price Variation

  • The law establishes a special commission to identify the acceptable and unacceptable factors contributing to price variation among providers, including a comparison of price variation with providers in other states.
  • It requires the special commission to review contracting practices that require payers to pay the same or similar prices to all provider locations and the feasibility of requiring insurers to separately contract with each provider location.
  • The law requires the special commission to recommend steps to reduce provider price variation to the Legislature by January 1, 2014.

Alternative Payment Arrangements

  • Private plans are not required to implement alternative payment methodologies or risk-based payments.
  • State Funded Plans: By July 1, 2014, the law requires the Group Insurance Commission (GIC) and MassHealth to implement alternative payment arrangements.

New Requirements for Providers and Accountable Care Organizations (ACOs)

  • Provider Registration: Provider organizations are required to register with the new Commission. Providers that do not register are prohibited from negotiating network contracts with any carrier or third-party administrator.
  • Market Impact Review: Providers must notify the new agencies and the Attorney General’s Office prior to making any material change to its operations or governance structure. The new agency will conduct a review and refer the provider to the Attorney General.
  • Risk-bearing Organizations: The law grants the DOI authority over risk-bearing provider organizations. It requires each registered provider organization that enters into or renews and payment arrangement with downside risk to become certified. Carriers are not permitted to enter into or renew contracts involving downside risk if the provider is not certified.
  • ACOs: The new agency is required to develop a process for registered providers to be voluntarily certified as ACOs (this is separate from the risk certification process)

Wellness Initiatives

  • Establishes a Commission on Prevention and Wellness, effective until July 1, 2016. Must report by June 30, 2015.
  • Creates a Prevention and Wellness Trust Fund which will support activities, including the adoption of workplace-based wellness or health management programs.
  • Wellness Tax Credit – Provides businesses with a tax credit of 25% (up to $10,000 in any one tax year) of the cost of implementing a wellness program.
  • Department of Public Health (DPH) and DOI shall provide a seal of approval to wellness programs implemented by businesses.
  • DPH and DOI will create a wellness guide for payers, employers and consumers, with information on: the importance of health lifestyles, disease prevention, the benefits of care management, and health promotion

For questions, please contact Ken Bettenhauser at 508-339-1300

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