Massachusetts Health Care Reform: How it was Crafted, Why it has Lasted

1. Massachusetts Health Care Reform:How it was Crafted, Why it has Lasted Jim Klocke Executive Vice President, Greater Boston Chamber of Commerce

2. Today’s Presentation • Baseline Conditions Pre-Reform • Key Elements of the Massachusetts Plan • How It Came Together • Recent Issues • Suggestions for the Federal Effort

3. Baseline Conditions Pre-Reform—Massachusetts in 2005 • Percent of population with health insurance well above national average • Availability of employer-provided coverage well above national average • Existing Free Care Pool—large and established, funding from • 1) state and federal governments, • 2) hospital payments, • 3) insurer payments (latter two passed on to employers who contribute to employee health insurance premiums)

4. Key Elements of Massachusetts Reform Plan • Individual health insurance mandate • Subsidies—Free coverage for individuals with incomes up to 150% FPL, scaled subsidies for those with incomes 151% - 300% FPL • Companies required to provide pre-tax access to health insurance via Section 125 plans—if not, have to pay workers’ emergency room bills (this provision does not require an employer contribution to employee health insurance) • “Fair Share” assessment to ensure that all firms contribute to free care pool (not an employer mandate)

5. “Fair Share” Assessment • Amount calculated each year by formula in law tied to free care pool usage • Amount capped at $295/worker/year • Paid by firms with 11+ employees that don’t make a “fair and reasonable” contribution to employee health insurance premiums—defined in regulations according to take-up rate and % of employer subsidy • Vast majority of firms are in compliance

6. How It Came Together • Compromise Major stakeholders (government leaders, advocacy organizations, business community, provider community) got some but not all of what each was looking for • Patient Negotiations Months of negotiations followed initial proposals made by Governor, Speaker, Senate President • Guiding Principle—Keep everyone at the table One of the biggest reasons Massachusetts plan was achieved

7. Recent Issues • Fair Share Assessment • Summer 2008—Patrick Administration proposed expanded definition of “fair and reasonable” premium contribution • Issues—number of firms paying under current definition, ERISA risk, prospect of penalties on high-benefit firms • After extensive discussions, modified definition adopted • Minimum Creditable Coverage • What must a health plan include to comply with the individual mandate?—legal lists vs. actuarial equivalents • Health Insurance Premium Inflation • Is, and will remain, largest challenge for Massachusetts plan because of individual mandate

8. Suggestions for the Federal Effort • If your experience is like ours, “reform” will evolve as proposals are scrutinized, criticized, improvised • A bill with 1-3 significant reforms is preferable to a “comprehensive reform” bill, because implementation will bring both positive and negative surprises • The Perfect is the Enemy of the Good, And of Final Passage