Health Care ReformHealth Care Reform

Overview and Lessons from MassachusettsOverview and Lessons from Massachusetts

Greater Nashua Human Resources AssociationMarch 10, 2009

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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

Why Should I Care About Massachusetts?

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Agenda

Healthcare Reform Origins

Healthcare Reform Overview

Individual Mandate

Employer Responsibilities Mandatory Offering of Section 125 Plan Fair Share Contribution Free Rider Surcharge

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Agenda

Insurance Reforms Expansion of Health Plan Eligibility Non-Discrimination Rules

Early Results

Employer Reactions

What’s Next

Q&A

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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 Origins

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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

Individual Requirements

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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

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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

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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

Healthcare Reform Law Overview

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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)

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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

Minimum Creditable Coverage (MCC)

Employer Requirements

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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

Section 125 Plan Mandate

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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

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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

Free Rider Surcharge

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Applicable to employers with 11 or more full-time equivalent employees (FTE) Beginning on October 1, 2008 - # quarterly payroll hours/500 >=

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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 - Application

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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

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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 #1

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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 – Test #2

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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)

Fair Share Contribution – Testing

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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

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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

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Form MA 1099 HC

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Employee HIRD Form

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Schedule HC

Insurance Law Reforms

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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

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Expansion of Health Plan Eligibility

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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)

Non-Discrimination Rules

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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

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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

Results

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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

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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

Employer Reactions

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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)

Self-Insured Plan Considerations

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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

Ongoing Employer Requirements

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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

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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

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Other States

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

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Q&A