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Want a Glimpse of Obamacare? Look at Massachusetts

Stigur Karlsson | E+ | Getty Images

Anyone curious about the future of health care in the United States needn't look much further than Massachusetts, which already has its own form of health care reform—Romneycare.

Signed into law in 2006 by then governor and later GOP presidential candidate Mitt Romney, the measure had backing from both political parties and became a blueprint of sorts for Obamacare—which goes into full effect next year.

There are some some key differences between the two laws: For example, Romneycare has lower penalty fees, lower numbers of workers before insurance is mandated for small companies, and it's funded differently. But Romneycare provides at least a small window for what's coming in 2014, say analysts.

"They have strikingly similar broad strokes, and what's happened in Massachusetts is a good reflection of what's ahead nationally," said Kosali Simon, a professor and health economist at Indiana University.

"Both aim at expanding health insurance coverage as much as possible and improving the quality of health care," Simon said. "More people will have insurance through the mandates, which both have, through the mandates and subsidizing low-income workers."

The percentage of uninsured was much smaller in Massachusetts than the national figure, Simon said, but she added that the total number of people without insurance has declined by 5 percentage points in Massachusetts. "More people will have insurance next year across the country, and people will have better health care coverage," she said.

What may not happen across the country next year, if Romneycare is any guide, is a dumping of insurance coverage by businesses. Fears circulated that many companies in Massachusetts would stop offering health insurance to workers starting in 2006 because of the costs. The thinking was that firms would rather pay the penalties for not offering insurance than to pay for the insurance itself.

But during the life of Romneycare, and even the year before, the percentage of firms with three or more workers that offer insurance rose from 70 percent to 76 percent, according to the Massachusetts Employer Survey.

It looks like that sentiment could repeat itself nationally. Nearly 70 percent of benefits professionals said in a poll that their companies "definitely will" keep offering coverage to full-time workers next year, according to a recent survey from the International Foundation of Employee Benefit Plans.

(Read more: When It Comes to Health-Care Reform, the IRS Rules)

Another reflection of the future from Romneycare —and not for the best—is what's happening to small businesses.

Health insurance premiums went up by double-digit percentage points for small business policies in the state for four out of the first five years of the reform law, according to the Retailers Association of Massachusetts. Some of that is a result of rising health care costs, but some is also from additional coverage—such as mental health—that businesses must offer under both reform laws.

Adding to the problem for small businesses in Massachusetts was that many did not take part in an insurance exchange set up to help lower costs. The exchange was halted after a year due to a lack of participation.

The Retailers Association of Massachusetts say that costs under Obamacare—which exempts businesses with less than 50 workers from the mandate, while it's 11 in Massachusetts—could rise in the double digits again in the state next year.

State health insurance exchanges set up through Obamacare, which are either run by the states or the federal government starting this October, are supposed to help reduce costs. Analysts aren't so sure.

"I would say that both plans don't really focus enough on reducing health care costs," said Peter Marathas, a health and benefits lawyer in the Boston office of Proskauer.

"Since Romneycare, costs for employers have gone up at least five percentage points over the national average," Marathas said. "There's administrative costs, premium costs, and it all ads up. We really need to focus on that, and these laws don't in my opinion."

Romneycare was expected to prevent businesses, especially smaller ones, from hiring more workers as they attempted to avoid going over the 11-person limit and being penalized if they didn't offer health insurance coverage. Those fears exist with Obamacare as well.

But a study last year by the Urban Institute said that Romneycare did not result in any significant job decreases, and that any job hiring freeze was due more to the troubled economy. Going forward, things might not be so clear cut.

"We have heard reports from across the retail community, including our restaurant members, that the penalty mandates are affecting expansion, franchising and hiring decisions today," said Neil Trautwein, vice president and employee benefits policy counsel of the National Retail Federation, in congressional testimony about Obamacare in 2011. The Congressional Budget Office estimated in 2011 that employers will create 800,000 fewer jobs by 2021 as a result of the law's policies.

Overwhelming the System?

Massachusetts added some 400,000 new people to the health insurance rolls when Romneycare started. Fears were that such a large number of people would overload the system, creating longer waiting periods to see doctors and flooding hospital emergency rooms—even in a state that has the highest doctor-to-patient ratio in the country.

The Massachusetts Medical Society reported that 19 percent of residents said they waited longer than usual to see a doctor in 2012, down from 25 percent in 2008. Emergency room visits remained high until 2010, when they dropped nearly four percent, according to a report by Blue Cross Blue Shield of Massachusetts Foundation.

It's expected that 14 million Americans will be added to the system from Obamacare in 2014 and 27 million by 2017, according to the Congressional Budget Office.

(Read More: President Vows Obamacare Will Meet Deadline)

"A big problem for Obamacare will be coordinating all the care for the new people," said Simon. "It's going to be very rough at first."

Massachusetts Approval Ratings

Whether the nation as a whole will come to embrace Obamacare is in doubt, say analysts. What they have liked so far is the provision that allows children to stay on their parent's insurance policy until the age of 26, something that's in Romneycare.

Also coming with Obamacare, and which Romneycare has now, is that no one can be denied insurance coverage due to a prior condition. Lifetime caps on coverage also go away.

But also ahead are the complexities of Obamacare—the bill has more than 900 pages to it, Romneycare had around 70. And there's the cost.

"Financing for Obamacare is going to be paid through taxes, fees and Medicare savings," said Kosali Simon. "Romneycare had some exsting funds for it and got federal funds. Massachusetts paid a lot less for it than what they got from the federal government."

Most people in Massachusetts are in favor of what they get from Romneycare. Surveys over the past five years show an approval rating by state residents of around 60 percent, while 30 percent oppose it.

Whether Obamcare gets that kind of approval rating remains to be seen, said Peter Marathas.

(Read more: White House, Republicans Spar Again Over Obamacare)

"There's a lot to like in Obamacare with the extended coverage and having kids on the insurance longer," he said.

"I wouldn't throw it out as a law," Marathas said. "But I'd really like it if lawmakers could sit down, re-think some of it and really work on cutting costs and making sure everyone is covered at an affordable price."

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