Health Care Reform

*Update - What Employers Should Know*

After months of high-stakes negotiations, the Massachusetts Legislature and the Governor finally reached an agreement on landmark health care reform last year.  The bill, which was signed into law on Wednesday, April 12, 2006, is a victory for Massachusetts.  It will provide greater access to health insurance while preserving nearly $400 million per year over the next 3 years in federal health care funding for Massachusetts.  It does this without imposing a broad-based payroll tax on employers, which the Chamber fought to prevent.  

Throughout this lengthy process, the Chamber has worked collectively with three major business groups – Associated Industries of Massachusetts, The Massachusetts Business Roundtable, and The Massachusetts Taxpayers Foundation – as well as legislative leaders, administration officials, and health care advocates to bring meaningful health care reform to the citizens of the Commonwealth.  We are confident that this collective effort has yielded positive results. 

The new law includes several significant, Chamber-supported reforms, including:

• expanded availability of pre-tax dollars for the purchase of health insurance;
• increased Medicaid provider reimbursements to reduce cost-shifting and slow the growth of monthly premiums;
• the creation of lower-cost policies through market reforms;
• increased transparency of health care cost and quality information; and
• a requirement that all individuals obtain health insurance. 

We feel that these reforms will enhance our regional competitiveness and strengthen economic growth.

Currently in Massachusetts, the vast majority of businesses contribute to their employees’ health insurance.  Under state law, those contributions include a $62-per-employee assessment into the free care pool – the fund that reimburses hospitals for the cost of providing care to the uninsured.  However, those businesses that do not contribute to their employees’ health insurance do not pay into the pool.   

Under the new law, the latter businesses are required to contribute $295 per full-time equivalent employee – a “fair share” assessment – to the state’s free care pool if they have more than 10 employees and do not make a “fair and reasonable” contribution to employee health insurance premiums.  This new assessment will not impact the vast majority of companies in Massachusetts and will create a measure of equality across the employer community.  (It should be noted that the “fair share” assessment provision contained in the final bill was vetoed by Governor Romney.  However, legislative leadership has indicated that they will override his veto in the coming days.) 

The new law also includes a provision requiring businesses with 11 or more workers to provide access to health insurance to their employees on a pre-tax basis.  Firms not currently providing such access can do so by offering a “125 plan” (referring to section 125 of the IRS code), which enables employees to purchase their own health insurance with pre-tax dollars.  Businesses with 10 or fewer employees are not subject to the 125 plan or fair share assessment requirements.

Now the focus shifts toward ensuring proper implementation of the new law – a process which will require an equally determined effort on the part of all who worked to achieve passage of this important reform proposal.  The Chamber will do its part.  We will continue to work in the months and years ahead to make health care more affordable for all of our members.