(Illustration via Canva)

AS THE 20TH ANNIVERSARY of Massachusetts’s landmark 2006 health care reform law, often referred to as Chapter 58, approaches, it is time for a critical reflection on its outcomes. The law, a precursor to the national Affordable Care Act, was built on the three-legged stool of access, quality, and affordability.

Acknowledging the state’s health care quality was already high, the primary focus of Chapter 58 was on expanding access to care while improving value and efficiency. The health care reform law gets high marks for expanding access but a failing grade on reducing costs through better value and more efficiency.

Chapter 58 introduced four fundamental reforms to expand health insurance coverage.

First, an individual mandate required all residents to purchase health insurance, spreading risk across a larger population and encouraging the use of preventative services. This mandate put indirect pressure on employers to offer health insurance coverage or lose employees to those companies that did so.

Second, the law redirected funds previously used to reimburse hospitals for uncompensated care. Instead of after-the-fact payments, this money would now subsidize the purchase of health insurance for low-income residents through a renamed Safety Net Trust Fund, which was intended to be phased out as the population became insured.

Third, the Massachusetts Health Insurance Connector Authority was created to inject consumerism into the marketplace. It was designed to allow employees to choose their own plans with a defined contribution from their employer, fostering product innovation and cost-consciousness.

Fourth, the law merged the individual and small-group insurance markets to provide better rates and stability for individuals. Prior to this reform, individual purchasers faced high health insurance costs because they tended to be older and sicker than the general population. Small businesses (50 or fewer employees) purchased insurance plans in the aptly named small-group market, with a separate risk pool that spread costs of coverage among all buyers in that market segment. Health reform merged the two markets to reduce the costs for individual purchasers through a cross-subsidy by small businesses.

As we assess the success of Chapter 58, we can certainly celebrate that access has increased, and quality has largely been maintained. These are important accomplishments. On cost, however, we have failed miserably.

The business community’s support for Chapter 58 was premised on the promise to enact subsequent legislation that focused on cost containment. In hindsight, the 2012 law enacted to tackle costs, had three fatal flaws.

The first flaw was the six-year delay in enactment of a cost containment law, as this signaled that cost control was not an urgent matter or a critical companion to Chapter 58.

The second mistake had to do with the powers bestowed on the newly created Health Policy Commission as the primary watchdog to review, report, and offer recommendations on ways to lower costs.

The HPC should have been granted more explicit authority to impose material fines on those providers failing to meet the annual health care cost benchmark. As a result, the benchmark has largely been ignored, and the HPC’s annual reports documenting the health care cost drivers in Massachusetts and recommendations for how to reduce costs have had little traction in spurring action by the Legislature.

Finally, and perhaps most importantly, the annual health care cost benchmark became a growth benchmark, not a cost savings benchmark, as advocated by employers. Thus, annual cost growth was expected, and that is what we have gotten each and every year since.

Had the benchmark required cost savings each year, we may have avoided runaway health inflation, consolidation of provider systems, which has driven up prices, and growing utilization of costly specialty care over primary care.

Despite its promising vision, the law’s implementation and the cost-containment legislation that was subsequently adopted have fallen far short of their goals, leading to a more expensive and challenging system to navigate now. Massachusetts has among the highest health care costs in the country, with annual increases consistently outpacing inflation and wage growth.

Instead of providing stability, the merged insurance market has seen small and mid-sized employers flee to self-insured plans to escape rising costs, leading to even higher premiums for the remaining small businesses and individuals. Enrollment in high-deductible plans has doubled in the last decade, with more consumers facing higher out-of-pocket costs.

The system remains anchored in expensive, hospital-based “sick care,” which accounts for over 90 percent of spending, while less than 8 percent goes to the primary and preventative care Chapter 58 intended to promote.

Market consolidation by large hospital systems has stifled competition and choice, driving up prices. Rather than fostering consumer choice, the Legislature has imposed over 60 mandated benefits, which now account for approximately 25 percent of health insurance premium increases. The Health Connector functions primarily as an administrator for subsidies rather than as a marketplace for innovation.

Meanwhile, the state’s Medicaid program, MassHealth, has grown to cover over a third of residents. Finally, the annual health care cost containment benchmark, established in 2012 to control spending, is routinely exceeded without consequence.

To address these failures and restore the original goals of affordability and access, five key reforms should be considered:

1. Restore consumer choice and affordability.

Lawmakers should allow insurers to offer more affordable products by placing a moratorium on new state-mandated benefits and allowing consumers to purchase mandate-free plans that meet federal minimal coverage requirements. Insurers should also be permitted to offer lower-priced, narrow network plans.

2. Strengthen primary and preventative care.

Access to primary care has worsened, not improved. A higher portion of health care spending must be directed to primary care providers. This can be achieved by easing their administrative burdens and exploring innovative models, such as allowing health savings accounts to pay for routine primary care directly, separate from insurance intended for unforeseen incidents.

3. Reexamine the merged market.

The federal Affordable Care Act, enacted after Chapter 58, introduced changes like premium tax credits that undermined the original purpose of the merged individual and small-group market. Today, small businesses in Massachusetts are forced to cross-subsidize premiums for individuals. Demerging these markets could provide significant cost relief for small businesses.

4. Reform the health care cost growth benchmark.

The state’s health care cost growth benchmark is ineffective. Meaningful financial penalties are needed for provider systems that exceed it. Furthermore, the benchmark methodology should be reformed to reduce costs rather than allowing for automatic annual growth. Commercial, Medicare, and Medicaid cost trends should be reported separately to provide a clearer picture of market dynamics.

5. Impose greater accountability.

The massive amount of taxpayer money spent on health care warrants much greater transparency. The Legislature must publish a detailed, publicly accessible annual report on all state health care spending, including MassHealth, the Group Insurance Commission, which oversees coverage for public employees, and various off-budget trust funds. This reporting must track how money is spent and whether it leads to better outcomes and lower costs.

The 20th anniversary of health care reform is a critical opportunity for Massachusetts to confront the system’s growing unaffordability. Failure to act carries dire economic and fiscal consequences. If we bring the same resolve shown 20 years ago, the state can tackle these challenges and reestablish itself as a leader in health care innovation.

Eileen McAnneny is president of the Employer Coalition on Health. She was the lead health care lobbyist for Associated Industries of Massachusetts when the 2006 reform law was enacted. Richard Lord was the president and CEO of Associated Industries of Massachusetts when the law was enacted. He also served on the initial board of the Massachusetts Health Care Connector and the Health Policy Commission.