By Matt Murphy

State House News Service

BOSTON -- Senate leaders are aiming to force Gov. Deval Patrick to seek a waiver from the Obama administration exempting the state from new requirements under the Affordable Care Act that would change the way insurers calculate health care rates and drive up premiums for many small businesses.

The Senate on Wednesday plans to take up legislation to align the state's health-care system with the Affordable Care Act set to take effect in 2014. One of the major changes required by the federal law is the phasing out of five of the nine rating factors currently used in Massachusetts to calculate premiums.

Though the Patrick administration secured a transitional waiver allowing the state to phase in the new rating system over three years, business groups and many lawmakers worry the changes could drive up costs for many small businesses by as much as 17 percent and hurt job growth just as the state is seeking to rein in health-care costs.

The Senate Ways and Means Committee, chaired by Sen. Stephen Brewer, has proposed an amendment to the ACA bill that would require the Patrick administration to seek a federal waiver from the rating factor changes and the new, less frequent annual rate filing requirement "to protect consumers and businesses in the commonwealth and in an effort to maintain current Massachusetts rating and rule requirements."

"I think what we'd like to see happen is the administration formally request a waiver that will basically allow us to include all nine of our rating factors. Our ultimate goal is to keep costs down for everybody, and this bill would address that," said Sen. Jamie Welch, a Springfield Democrat and co-chair of the Health Care Financing Committee.

Welch said he did not believe the Patrick administration had asked for a full waiver when negotiating the agreement for a three-year transition. "As far as we can tell there hasn't been a formal request for a waiver," Welch said.

The amendment would direct the administration to negotiate with the Obama administration in consultation with a member of the House and Senate, as appointed by the Speaker and Senate President, and to report monthly to the Joint Committee on Health Care Financing on the status of the waiver request.

A final report would be due to the Legislature on Oct. 1, 2014.

Asked whether the administration had formally sought a waiver from the rating factors, a Patrick administration official declined to directly answer, but forwarded copies of a letter from December 2012 in which state Insurance Commissioner Joseph Murphy and Secretary of Administration and Finance Glen Shor asked federal officials to allow all states to seek waivers or a "reasonable transition period."

The next written communication between the administration and the Centers for Medicare and Medicaid Services provided to the News Service came in April when Massachusetts was granted a three-year transitional period. Administration officials would not comment on any verbal negotiations that might hae taken place over those three intervening months.

"As the only state in the nation to have received a transition period for implementing the ACA's rating changes to the small and non-group markets, we appreciate the desire to mitigate any negative impacts for small businesses.

That's why the Patrick administration worked closely with HHS to aggressively explore all of our options, and to secure this transition period for the Massachusetts marketplace," said Alex Zaroulis, spokeswoman for the Executive Office of Administration and Finance.

Senate Minority Leader Bruce Tarr called the issue "a matter of critical importance" for employers, insurers and the economy.

"This is a situation where the impact is going to be so severe that it deserves an exhaustive effort. Right now we have a transition, but it's a transition to higher rates and the goal should not be to delay the impact, it should be to avoid the impact," Tarr said.

The ACA bill stirred spirited debate in the House last week, where Democrats said the legislation would help secure new federal funding for health care initiatives and Republicans calling for a court opinion on whether the ACA should supercede the state law or whether the state should challenge changes imposed by the federal government in court. 

Tarr said Senate Republicans will file an amendment to the bill blocking changes to the rating factors from being included the general laws, arguing that including the phased-in rating factors would be inconsistent with seeking a waiver.

Five unique factors - industry, participation rate, group size, intermediary discount and group purchasing cooperatives - will be phased out simultaneously by the end of 2016, counting for progressively less of the overall rates.

The ACA allows four factors: age, family size, geographic area and tobacco use. Congressional Republicans have balked already at the transitional waiver for Massachusetts while other states with similar business concerns must adapt immediately.

Federal health officials also granted a transitional waiver to Massachusetts allowing insurers to file small group health insurance rates on a quarterly basis through 2016, after which point rates will be filed annually as required under the ACA for individuals.

State lawmakers want to keep the quarterly filing schedule to allow the small group market to adjust throughout the year based on market trends and utilization.

Kristen Lepore, vice president of government affairs at Associated Industries of Massachusetts, said the elimination of the group size factor would have the biggest impact on rates. Depending on the type of employer, Lepore said she's seen estimates ranging from 11 percent to 30 percent premium increases on businesses.

"A.I.M. has been advocating for a waiver very aggressively. We are so pleased the Senate agrees with us," Lepore said.

Lepore and A.I.M. Executive Vice President John Regan traveled to Washington D.C. last week to discuss their concerns with the state Congressional delegation. She said it was the first time in 13 years at the organization that Regan went to the capital on business.

"They were definitely concerned about the impact on the small employers so we'll continue having conversations with them," she said, discussing the meeting.