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Health Care Reform Overview and Lessons from Massachusetts

Health Care Reform Overview and Lessons from Massachusetts. Greater Nashua Human Resources Association March 10, 2009. Why Should I Care About Massachusetts?. Massachusetts Healthcare Reform Law is the Template for National and Other State Reforms

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Health Care Reform Overview and Lessons from Massachusetts

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  1. Health Care Reform Overview and Lessons from Massachusetts Greater Nashua Human Resources Association March 10, 2009

  2. Why Should I Care About Massachusetts? • Massachusetts Healthcare Reform Law is the Template for National and Other State Reforms • Architects of Massachusetts Law are Now Working on Healthcare Reform Plans in Washington, DC • Recent American Recovery and Reinvestment Act (ARRA) • Used employer based system – (COBRA) to assist involuntarily terminated workers • Obama FY10 Budget Includes $634B “down payment” on Healthcare Reform

  3. Agenda • Healthcare Reform Origins • Healthcare Reform Overview • Individual Mandate • Employer Responsibilities • Mandatory Offering of Section 125 Plan • Fair Share Contribution • Free Rider Surcharge

  4. Agenda • Insurance Reforms • Expansion of Health Plan Eligibility • Non-Discrimination Rules • Early Results • Employer Reactions • What’s Next • Q&A

  5. Healthcare Reform Origins • Massachusetts Healthcare System • 500,000 uninsured residents • $600M annually paid into the “uncompensated care pool” • Operated under a federal waiver allowing them to divert $385M to two hospital systems to provide care to the uninsured • In 2006 the Centers for Medicare & Medicaid Services (CMS) required the state to change from providing care to providing insurance • Faced with this potential loss of $385M of federal dollars, the Massachusetts Healthcare Reform Law was born

  6. Healthcare Reform Law Overview • Individual Mandate • Not an employer mandate, BUT.. • Created the Massachusetts Health Insurance Connector Authority • Administers most aspects of the healthcare reform law • Offers the Commonwealth Care Plan (free or subsidized) • Offers the Commonwealth Choice Plan (as an exchange) • Defines “Minimum Creditable Coverage” • Establishes Affordability Schedule • Employer Responsibilities

  7. Individual Requirements

  8. Healthcare Reform Law Overview • Every Massachusetts resident (18+) was required to be covered by a medical insurance policy on July 1, 2007 (if “Affordable”) • Every Massachusetts resident is required to be covered by a medical insurance policy that meets certain minimum criteria ( called MCC) on January 1, 2009 (if “Affordable”) • Minimum Creditable Coverage (MCC) required may change annually • Penalties for uninsured if coverage is “Affordable”

  9. Healthcare Reform Law Overview • Who is required to purchase insurance coverage or face a penalty? • An individual with annual gross income of $52,501 or more • A couple with annual gross income of $82,501 or more • A family with annual gross income of $110,001 or more • If gross income is less than above, but coverage is deemed “Affordable” – below a maximum premium threshold, insurance coverage must be purchased as well

  10. Healthcare Reform Law Overview • Individual Penalties for Non-Compliance • 2007 - Loss of Personal Exemption on Tax Return • Approximately $219 • 2008 – Penalty Assessed on Tax Return • $912 • 2009 – Penalty Assessed on Tax Return • $1,068

  11. Minimum Creditable Coverage (MCC) • What is “Minimum Creditable Coverage” (MCC) ? • Minimum level of insurance coverage that allows individuals to avoid a penalty (if “affordable”) • Not an employer requirement, BUT • If a non-MCC plan is offered by an employer and an employee is eligible for coverage, the employee will be penalized • Employers need to review plans to ensure they are not unknowingly penalizing employees • Self-insured and out of state carrier plans require more stringent review (especially NH employers with MA employees)

  12. Minimum Creditable Coverage (MCC) • What is “Minimum Creditable Coverage” (MCC) for 1/1/09? – High Level • Plans that include preventative/primary care, ER, hospitalization, outpatient, MH/SA, & prescription drugs • Maximum in-network deductibles of $2,000 individual and $4,000 family • Separate, maximum prescription drug deductibles of $250 individual and $500 family allowed • Maximum in-network out-of-pocket amounts of $5,000 individual and $10,000 family (must include deductible and certain copays) • OOP Maximums don’t need to include prescription drug deductible or co-payments • High Deductible Health Plans (HDHP’s) used in conjunction with Health Savings Accounts

  13. Employer Requirements

  14. Section 125 Plan Mandate • Premium Only Plan (POP) required rather than Medical or Dependent Care Plan • Plan document must be made available to the Connector • No requirement the employer contribute to the plan (but must still adopt and document) • Waiting period can be no longer than the waiting period for the medical plan, or 60 days, whichever is less

  15. Free Rider Surcharge • Applicable to employers with 11+ FTEs based on 2,000 annual payroll hours • Assessed in addition to/separately from the Fair Share Contribution • Applicable to Non-Providing Employers whose employees or their dependents: • Receive free care more than 3 times in a hospital fiscal year (one individual), or • Receive free care more than 5 times in a year (in the aggregate)

  16. Free Rider Surcharge • Surcharge will be a sliding scale percentage of the state’s cost of services to provide free care (20%-100%) • First $50,000 of care will be exempted • Surcharge can be avoided by adopting a Section 125 (cafeteria) plan • Does not require employer contributions • Effective 1/1/07 for care received after 7/1/07

  17. Fair Share Contribution - Application • Applicable to employers with 11 or more full-time equivalent employees (FTE) • Beginning on October 1, 2008 - # quarterly payroll hours/500 >= 11 • No more than 500 hours per employee are counted in the applicable measurement period • All hours – vacation, sick, leave, disability, overtime, holiday, etc. are included • Temporary employee hours included if worked 150 hours in previous 12 months ending on the last day of the reporting period • This definition only used for applicability of the FSC

  18. Fair Share Contribution – Test #1 • Percentage of Employees Enrolled • Based on the percentage of Full Time Employees enrolled in the Employer’s Group Health Plan (a subsidized plan) • Full Time Employee is an employee that works the lower of: • 35 hours per week • The number of weekly hours required for full time health plan eligibility (employer’s definition) • Include in calculation • All MA employees even if not MA residents (MA work location) • A part time employee is a Full Time Employee if worked full time a majority of the quarter

  19. Fair Share Contribution – Test #1 Calculation is Quarterly Total number of full-time (as defined) employees enrolled in a subsidized group health plan on the last day of the calendar quarter ______________________________________ Total number of full-time employees (as defined) on the last day of the calendar quarter

  20. Fair Share Contribution – Test #2 • Premium Contribution Standard • Employer must make a contribution of at least 33% of Group Health Plan Premium • Lowest employer contribution rate in effect for FT must be used • Offered to all full-time employees (as defined by employer and health plan) • No more than 90 days after the date of hire • Waiting period is now “regulated” • Plan must be available for the entire quarter

  21. Fair Share Contribution – Testing • For 10/1/08 – 12/31/08 • Test # 1 - must have 25% enrolled OR • Test # 2 – It meets the employer contribution standard • Beginning January 1, 2009 • Employers with 50 or fewer FTEs (applicability definition) need to pass either Test #1 or Test #2 • Employers with 51 or more FTEs (applicability definition) need to pass BOTH tests or: • Have at least a 75% enrollment percentage for Full Time Employees • Fair Share Contribution remains at $295 annually per employee (for now), if an employer fails the test(s)

  22. Health Insurance Responsibility Disclosure • Health Insurance Responsibility Disclosure (HIRD) • Employee “Paper” Form Required • Applicable to Employers with 11+ FTEs • Total quarterly payroll hours divided by 2,000 >=11 • Payroll hours for all employees and includes all hours (e.g., FMLA, Sick, Vacation, Disability, Holiday) • Purpose is to enforce the individual mandate • Data will be matched to the Department of Revenue and Department of Unemployment Assistance • Penalties for employers $1,000-$5,000

  23. Other Employer Responsibilities • Form MA 1099 HC • Must be provided to all members who had coverage in the calendar year • Due date January 31 each year (to employees) • Most fully-insured health plans issuing forms to members • Self-insured employers need to contract with administrator • Data also filed with Department of Revenue to verify enrollments

  24. Form MA 1099 HC

  25. Employee HIRD Form

  26. Schedule HC

  27. Insurance Law Reforms

  28. Expansion of Health Plan Eligibility • Effective January 1, 2007 • Fully-Insured group health insurance policies providing family coverage must maintain coverage for young adults up to the earlier of: • Age 26; or • 2 years following loss of dependent status under the provisions of the Tax Code • Terminating dependent status of a qualifying child at age 19 or age 24 for students

  29. Non-Discrimination Rules • Effective July 1, 2007 • Employers must offer the same coverage to all full-time employees (expected to work 35+ hours per week) • Employers cannot make a lower contribution to a low-wage employee than they do for a high-wage employee for the same product • Example – employer can’t pay 100% for some employees and 80% (or another lesser amount) for other employees, unless it is reverse discrimination (paying more for lower wage employees)

  30. Results • 440,000 “Newly Insured” Residents (March 2008) • 159,000 employer sponsored plans • 72,000 Mass Health • 176,000 CommCare • 32,000 Non-group • 97,000 Residents assessed a penalty for not having coverage in 2007 tax year • No significant “crowd out” • Uncompensated Care Pool Reductions • $68 M from Q1 FY07 to Q1 FY08

  31. Results • 2,800+ Employers designated the Connector in their Section 125 plan documents as an Option for Employees • Massachusetts Residents that have health insurance • 78% Private • 20% Government • 2% Both • 5% of Massachusetts Residents do not have health insurance (2007) • Down to 2% in 2008

  32. Employer Reactions • Changed eligibility rules • Hours worked • Definition of full time • Eliminated plan options • Created separate legal entities • Changed “home office” to outside of Massachusetts • Monitored/changed employee work schedules • Changed plan designs

  33. Employer Reactions • Designated the Connector as their insurance provider for their employees • Changed Employee Contribution Formulas • Based on affordability guidelines • “Catch – 22” problem • Changed to self-insurance

  34. Self-Insured Plan Considerations • Some aspects of Massachusetts Reform Law do not apply • Expansion of dependent eligibility • Non-discrimination of plan offerings • Non-discrimination of employee contributions • Other rules may apply • Section 105(h) non-discrimination rules • Section 125 non-discrimination rules (may also be a consideration for some fully-insured plans)

  35. Ongoing Employer Requirements • Plans should be MCC compliant • To protect employees • Fair Share Reporting and Employer HIRD due Quarterly • Online filing • Employee HIRD forms annually and at Qualifying Events • Most recent version required • Monitor Updated Affordability Schedule • Annually • Application of Non-Discrimination and Eligibility Rules

  36. Other States • Rhode Island • Employers that have 25+ employees • Must set up and offer a Section 125 (POP) by July 1, 2009 • Connecticut • Any Connecticut employer • Must set up and offer a Section 125 (POP) by October 1, 2007 • Missouri • All fully-insured employers • Must set up and offer a Section 125 (POP) by January 1, 2008

  37. Other States • Vermont • Health Care Reform Law similar to Massachusetts • Applicable to employers with 8 or more employees prior to 2009; 4 or more in 2009 • $365 assessment (Yes, a dollar a day) • California (and others) • Considering Massachusetts healthcare reform model (failed to pass last session) • San Francisco • Beginning January 1, 2009, the minimum health care expenditure rate for employers with 20 to 99 employees is $1.23 per hour; for employers with 100 or more employees, the rate is $1.85 per hour

  38. Other States • New York • Considering raising “dependent” age to 30, yes 30 • Cost of coverage would be paid by employee

  39. Q&A

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