May 17, 2012

by Lynch Associates, Inc.

As the 2011-2012 legislative session enters a period of great activity as the end of formal sessions approach on July 31^st, there are a number of pending matters with great impact on businesses of all sizes.  Among recent items of interest, please note the following:

Health Care Payment Reform

With health care reform legislation being pushed by Governor Patrick for the better part of 10 months, the Massachusetts Senate and Massachusetts House of Representatives released competing versions of payment reform in an attempt to drive down the cost of health care in Massachusetts. Where Health Care Reform I focused on requiring individuals to obtain insurance and Health Care Reform II in 2010 focused on reining in insurers, the most recent legislation aims directly at providers – large and small.  As the attached sheets reference, the House and Senate have taken different approaches to accomplish the same task.  Under the Senate version, more flexibility is built into a system that, while pushing for accountable care organizations within the public payer market, makes it incentivized in the private market.  Under the House’s proffered legislation, the move towards accountable care organizations and patient centered medical homes is accelerated in both the private and public payer market.  (In fact, the House version builds in a “luxury tax” of sorts on any prices that exceed 20% of the established baselines).

Among other items included within both the Senate and House versions: medical malpractice reform; implementation of extended electronic medical records infrastructure resources; a prevention fund to pay for competitively bid health and wellness programs; workforce training and transitioning funds for the health care workforce; tuition reimbursement/loan forgiveness for primary care providers (MDs, NPs, etc.) to work in rural settings or other areas where primary care practitioners are scarce; and a variety of commissions to analyze progress on the identified initiatives.

The Massachusetts Senate is currently debating their version of health care reform with the House of Representatives expected to undertake their legislation in the first weeks of June.

Workers Compensation

The Division of Insurance held a hearing at the end of April to discuss the proposed statewide average rate increase of 19.3 percent to workers compensation rates. The purpose for the hearing was so that the Commissioner can determine whether the proposed classifications and rates are excessive, inadequate, or unfairly discriminatory.

Less than 50 people attended the public hearing including staff from the Attorney General’s Office and the State Rating Bureau who testified in opposition to the rate increase. Massachusetts Chamber of Commerce President, Debra Boronski testified on behalf of her members citing the unfair demand on already struggling business, economic hardships, and an unhealthy market.

Supporters of the workers compensation insurance increase, namely underwriters, are asking the state to approve the rate increase, saying it reflects the “real costs” of providing the line of insurance to Massachusetts employers.

The Workers’ Compensation Rating and Inspection Bureau of Massachusetts’ (WCRIB) has pushed for a rate increase since 2001. If approved, this would be the first increase in nearly 10 years. Massachusetts has one of the oldest operating workers compensation systems in the nation.

In 1985, the Legislature made substantial changes to the worker’s compensation law; most notably they increased a number of benefits. Shortly thereafter, the flaws of this newly implemented system became apparent. From 1986 to 1991, the sharp rise in claims coupled with DOI’s resistance to provide insurers with adequate rates, insurers began to refuse to write voluntary policies, and many threatened to leave the marketplace entirely.

In 1991, the second major workers compensation rate reform in six years was signed by Governor William Weld. If approved, the 19.3% workers compensation rate increase would be 58 percent lower than in 1991.

While the DOI has not provided an exact timeline for its decision, there is a general feeling that the workers compensation rate will increase.  Many individuals and policymakers, not associated with DOI, believe the rate increase will be roughly 7%-10%.

Minimum Wage & Paid Sick Leave Legislation

At the end of March, advocates for paid sick leave and minimum wage increases rallied at the State House in an effort to accelerate consideration of the two proposals.  In ramping up support, advocates argue that earned sick time prevents illness transmissions in the workplace, saving employees and their families more than $16 million in lost wages and medical costs.  Groups supporting the paid sick leave include: Greater Boston Legal Services, Mass AFL-CIO, National Association for Social Workers, MA Chapter,; Coalition for Social Justice, and New England United 4 Justice.  The legislation, HB 3995, received a favorable report from the Joint Committee on Labor and Workforce Development on March 20^th.   Under the revised language, employees accrue 1 hour of paid sick time for every 30 hours worked.  The measure, which is currently before the Joint Committee on Health Care Financing, is opposed by the Massachusetts Chamber of Commerce, the National Federation of Independent Businesses and the Associated Industries of Massachusetts, among other groups.

With respect to legislation attempting to increase the minimum wage, SB951 was released favorably from the Joint Committee on Labor and Workforce Development.  The legislation, which currently sits before the Senate Committee on Ways and Means, would institute a graduated minimum wage increase to $8.75 beginning July 1, 2011 and to $9.50 beginning July 1, 2012, and then $10.00 beginning July 1, 2013.  The legislation is supported by the Massachusetts AFL-CIO and other labor groups; but is strongly opposed by employer organizations such as NFIB, AIM and many others.

With time running out in formal sessions (July 31^st) (where controversial matters can be advanced), the prospects for these two pieces of legislation look cloudy.  That said, a last minute push – despite employers’ arguments that either change will have a deleterious impact on the Commonwealth’s growth – could change the current thinking.

Economic Development Legislation

The Joint Committee on Economic Development and Emerging Technologies released its omnibus economic stimulus this past week.  The legislation, which Speaker DeLeo has said will target key areas of the jobs economy, is expected to be considered by the House within a week or two.  Provisions of the legislation include:

• Expanding the I-Cubed Legislation to support large-scale development projects;
• Extending tax credits for two more years, until 2015, to allow redevelopment of brownfields;
• Creating a tax credit program under which credits would be competitively awarded based on “community improvement efforts.”
• Requiring small business loan review boards to offer feedback, including information about alternative financing programs, to small business owners when their loan requests are denied;
• Requiring the state pension fund to invest at least $100 million, up from the current $50 million, in institutions that make capital available to small businesses;
• Creation of a local infrastructure development program to help cities and towns leverage private funding for infrastructure improvements needed to support economic development;
• Tasks a new Mass Creative Economy Network with creating a mentoring network and a way for creative economy businesses to be certified;
• Consolidates six programs into a MassWorks Infrastructure Program, the state’s latest effort at “one-stop shopping”;
• Creation of a new Innovation Investment Fund that would offer matching grants to research and development projects, with eligible projects needing to secure at least $3 for every $1 of state money;
• Establishes and funds a Talent Pipeline Program that would match dollar-for-dollar stipends for interns at tech and innovation start-ups and “builds connections to venture capital financing.

While the House Committee on Bonding and Capital Assets will hold a public hearing on the legislation today (Thursday) and then move the legislation for quick consideration; it remains to be seen where this legislation will fall among the Senate’s priorities.  That said, it can be expected that this legislation may be one of the pieces that will go “down to the wire” as the July 31^st deadline approaches.

As formal sessions for the 2011-2012 legislative session draws close, we will continue to monitor the aforementioned items as well as any proposed changes to the state budget, unemployment insurance, treble damages for failing to pay wages, issues involving the definition of independent contractor as well as a host of other issues being tracked for the Massachusetts Chamber of Commerce.  If you have any questions or concerns, please do not hesitate to let us know.