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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 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 • 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
Agenda • Healthcare Reform Origins • Healthcare Reform Overview • Individual Mandate • Employer Responsibilities • Mandatory Offering of Section 125 Plan • Fair Share Contribution • Free Rider Surcharge
Agenda • Insurance Reforms • Expansion of Health Plan Eligibility • Non-Discrimination Rules • Early Results • Employer Reactions • What’s Next • Q&A
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
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
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”
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
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
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)
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
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
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)
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
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
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
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
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
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)
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
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
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
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)
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
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
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
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
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)
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
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
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
Other States • New York • Considering raising “dependent” age to 30, yes 30 • Cost of coverage would be paid by employee