Everyone knows by now that our state has passed a new health insurance law. Television cameras from national networks crowded into Faneuil Hall to record the bill-signing ceremony. Editorial writers and pundits have written thousands of words about the law, praising or condemning it, hopeful or dismissive of its substance. Now that the commotion has slowed down, here’s a look at what we can expect from the new law.
Its goal is revolutionary: To provide health care insurance coverage to virtually all the residents of Massachusetts by reducing costs, subsidizing policies and requiring purchase. In this article, I will first concentrate on its application to individuals, and then consider its effects on employers.
The law will not change insurance for most of us. If you receive Medicare or have private health insurance, your insurance remains. If you are enrolled in MassHealth, you will even qualify for enhanced benefits. And if you have just graduated from school, you will gain the option to remain on your family’s plan for up to two years.
It is the 500,000 uninsured residents whose lives will change. They must sign up for an insurance plan by the summer of 2007 if an affordable plan is available. Employers have an incentive to offer insurance plans, facing a $295 charge if they refuse to do so, but the final responsibility rests with the employee. The state now has the challenge of authorizing and approving affordable health insurance plans for those individuals to purchase.
The law establishes “The Connector,” a new office to oversee many aspects of the law. For starters, it assesses new lower-cost insurance products. No product can be sold until the Connector approves it. The new policies, which should be available by October of this year, may offer limited networks and lower costs. They will, however, offer all mandated benefits.
The Connector will also serve as a junction between individuals and insurance companies. It will help find appropriate policies, and it can allow two part-time employers to contribute to a single insurance plan.
The subsidies carry a substantial cost, but much of the funding will come from diminished use of the free care pool. The pool has long paid to provide medical and hospital care for uninsured individuals.
If you work for a small business that offers a new plan, you will be able to reduce the cost of premiums with pre-tax earnings. The new law will still help you buy coverage, however, even if your employer does not offer an insurance plan. Today’s individual policies will be merged with small groups, bringing an immediate rate reduction in excess of 25 percent. High-deductible policies, now banned, will be available to those who enroll in health savings accounts. Those accounts will for the first time be deductible on state tax returns.
Let us now turn to a consideration of the effects that the new health insurance law will have on employers in Massachusetts. If you run a business in this state, you are probably aware that there is now an expectation that employers make health insurance available for purchase by their employees.
While this is not technically a mandate, the cost of non-compliance can be steep. You are expected to offer an insurance plan if your payroll includes more than 10 full time equivalent (FTE) employees who do not have insurance through another source. You will be assessed $295 per year per FTE if you do not offer insurance, and you may face an additional surcharge if your uninsured employees use more than $50,000 through the state’s free-care health services.
Now that we’ve covered the risks of non-compliance, here are ways you can use the new law to offer coverage to your workers
The state established the Health Insurance Connector as a sort of clearinghouse for insurance offerings. This new entity approves new insurance plans and provides a link between insurers, employers and individuals. Employers will find plans through the Connector, removing the necessity to deal with individual insurance companies. The Connector can also work to split employer contributions for a worker with two part-time jobs. It should reduce costs both because of the flexible new products and the expanded population in the insurance pool. You can rely on any approved plan.
Employers will be able to offer a “Section 125” plan, named for its section in the IRS code. That plan gives an immediate benefit to employees by allowing them to deduct their premiums from pre-tax dollars. The employer’s contribution is required to be “fair and reasonable,” with that amount to be determined by the state. Because those plans will come through the Connector, they should be much more affordable than present policies.
Other items that may affect you: If you are in the Insurance Partnership, you will have minor changes to make its provisions mesh with the new law. New lower-cost insurance policies can, for the first time, include high deductibles if they are linked with health savings accounts.
After you go through all the work of determining your requirements, finding insurance and offering it to employees, you have one more step. You and your employees must complete and sign “Health Insurance Responsibility Disclosure” forms under oath. The forms state whether you offer and contribute to insurance and whether your employee has accepted that offer. You are not responsible for any employee who has declined your insurance offering.
As you can tell from this article, the new law is complex. Its implementation will be complex as well, and its success is not guaranteed. “The devil is in the details,” says an old warning, and the health care details are indeed critical. I take hope from the recently implemented Medicare-D program. Equally complex, it is judged as a remarkable success as initial enrollment closes. Costs are lower than projected; multiple insurers participate. Most important, millions of seniors now have prescription insurance.
I will do all in my power to provide the same success for our new Massachusetts health insurance law. Please contact me with any questions you may have regarding this or other matters.
Representative Hargraves can be reached by telephone at (617) 722-2305, or by e-mail at RepRobertHargraves@hou.state.ma.us.