Massachusetts health care reform

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Commonwealth Health Insurance Connector Authority
Connector Logo
Agency overview
Formed	April 12, 2006
Headquarters	Boston , Massachusetts
Agency executive	Jon Kingsdale, Executive Director
Website
www.mahealthconnector.org

The Massachusetts health care reform law was enacted in 2006. It requires nearly every resident of Massachusetts to obtain health insurance coverage. Through the law, Massachusetts provides subsidized health care for residents earning up to 100% of the Federal Poverty Level, and partially subsidized health care for those earning up to 300% of the FPL, depending on an income-based sliding scale. The law is credited with covering an additional 439,000 Massachusetts residents as of April 1, 2008.^[1] The law established an independent public authority, the Commonwealth Health Insurance Connector Authority, also known as the Health Connector, which offers the subsidized coverage and facilitates the selection and purchase of private insurance plans by individuals and small businesses.^[2][3] Incentives for residents to obtain health insurance coverage include tax penalties for failing to obtain an insurance plan. In 2007, Massachusetts tax filers who failed to enroll in a health insurance plan that was deemed affordable for them lost the $219 personal exemption on their income tax. In 2008, penalties increase by monthly increments, and are based on half of the cost of a health insurance plan.^[4][5]

The reform law was enacted as Chapter 58 of the Acts of 2006 of the Massachusetts Legislature, entitled An Act Providing Access to Affordable, Quality, Accountable Health Care. In October 2006, January 2007, and November 2007, bills were enacted that amended and made technical corrections to the statute (Chapters 324 and 450 of the Acts of 2006, and chapter 205 of the Acts of 2007).^[6]

Contents 1 Background 2 Reform coalitions 3 Legislation 4 Statute 4.1 Commonwealth Health Insurance Connector Authority 4.2 Commonwealth Care Health Insurance Program 4.3 Employer Taxes 4.4 Individual taxes 4.5 Young Adult Coverage 5 Implementation 6 Outcomes 7 Possible legal challenges 8 See also 9 References 10 External links

[edit] Background

Estimates of the number of Massachusetts residents who were uninsured in 2006 range from 395,000^[7] to 653,000.^[8] Due to their lack of health insurance coverage, uninsured residents commonly utilize emergency rooms as a source of primary care.^[9] U.S. hospitals are required to provide care even if a patient cannot pay for it, regardless of residency status.^[10] As a result, hospitals faced unpaid bills and mounting expenses to care for the uninsured.^[11]

In Massachusetts, a fund of approximately $700 million, known as the Uncompensated Care Pool (or "free care pool"), was used to partially reimburse hospitals and health centers for these expenses and the expenses of non-residents.^[12] The fund was raised through an annual assessment on insurance providers and hospitals, plus contributions of state and federal tax revenue. By implementing the health reform law, expenses incurred by services to the uninsured would decrease as the number of covered Massachusetts residents increased. In 2006, MIT professor Jonathan Gruber determined that there was enough money in the "free care pool" to pay for reform legislation without requiring additional funding or taxes.^[13]

[edit] Reform coalitions

In November 2004, political leaders began advocating for major reforms of the Massachusetts health care system to expand coverage. First, the Senate President Robert Travaglini called for a plan to reduce the number of uninsured by half. A few days later, the Governor, Mitt Romney, announced that he would propose a plan to cover virtually all of the uninsured.

At the same time, the ACT (Affordable Care Today) Coalition introduced a bill that expanded MassHealth (Medicaid) coverage and increased health coverage subsidy programs and required employers to either provide coverage or pay an assessment to the state. The coalition began gathering signatures to place their proposal on the ballot in November 2006 if the legislature did not enact comprehensive health care reform, resulting in the collection of over 75,000 signatures on the MassACT ballot proposal. The Blue Cross Blue Shield Foundation also sponsored a study, "Roadmap to Coverage," to expand coverage to everyone in the Commonwealth.^[14]

Attention focused on the House when Speaker DiMasi, speaking at a Blue Cross Blue Shield Foundation Roadmap To Coverage forum in October 2005, pledged to pass a bill through the House by the end of the session. At the forum, the Foundation issued a series of reports on reform options, all of which included an individual mandate. At the end of the month, the Joint Committee on Health Care Financing approved a reform proposal crafted by House Speaker DiMasi, Committee co-chair Walrath and other House members.^[15]

Massachusetts also faced pressure from the federal government to make changes to the federal waiver that allows the state to operate an expanded Medicaid program. Under the existing waiver, the state was receiving $385 million in federal funds to reimburse hospitals for services provided to the uninsured. The free care pool had to be restructured so that individuals, rather than institutions, received the funding.^[16]

[edit] Legislation

In fall 2005 as the House and Senate each passed health care reform bills.

The legislature made a number of changes to Governor Romney's original proposal, including expanding MassHealth (Medicaid) coverage to low-income children and restoring funding for public health programs. The most controversial change was adding a provision charging firms with 11 or more workers that do not provide "fair and reasonable" health coverage to their workers. The charge, initially $295 annually per worker, is intended to equalize the free care pool charges imposed on employers who do and do not cover their workers. The legislature also rejected Governor Romney's proposal to permit even higher-deductible, lower benefit health plans.^{[citation needed]}

On April 12, 2006 Governor Mitt Romney signed the health legislation.^[17] He vetoed 8 sections of the health care legislation, including the employer assessment.^[18][19] Romney also vetoed provisions providing dental benefits to poor residents on the Medicaid program, and providing health coverage to senior and disabled legal immigrants not eligible for federal Medicaid.^[20][21] The legislature promptly overrode six of eight gubernatorial section vetoes, on May 4, 2006, and by mid-June 2006 had overridden the remaining two.^[22]

[edit] Statute

The enacted statute, chapter 58 of the acts of 2006, established a system to require individuals, with a few exceptions, to obtain health insurance.^[23] Chapter 58 has several key provisions: the creation of the Health Connector; the establishment of the subsidized Commonwealth Care Health Insurance Program; the employer Fair Share Contribution and Free Rider Surcharge; and a requirement that each individual must show evidence of coverage on their income tax return or face a tax penalty, unless coverage was deemed unaffordable.^[23] The statute also expands MassHealth (Medicaid and SCHIP) coverage for children of low income parents and restores MassHealth benefits like dental care and eyeglasses. A merger of the individual (non-group) insurance market into the small group market will allow individuals to get lower group insurance rates. Payment rates are increased to hospitals and physicians, and a new "Quality and Cost Council," will issue quality standards and publicize provider performance.^[24] Chapter 58 also sets up a Disparities Council, funds automated prescription ordering in hospitals, and implements changes to the public health council, state insurance laws, mandated benefit requirements, and other health-related programs. The following are the most prominent features.

On October 26, 2006, the Commonwealth enacted chapter 324 of the acts of 2006, legislation making adjustments and technical corrections to chapter 58. The statute contains 82 sections and includes sections amending effective dates for many of the private insurance provisions of chapter 58. Another technical corrections bill, chapter 450 of the acts of 2006, was enacted on January 3, 2007. The statute includes more adjustments to effective dates. A third technical corrections statute was enacted on November 29, 2007, as chapter 205 of the acts of 2007.

[edit] Commonwealth Health Insurance Connector Authority

The Health Connector is designed as a clearinghouse for insurance plans and payments. It performs the following functions:

• It administers the Commonwealth Care program for low-income residents (up to 300% of the FPL) who do not qualify for MassHealth^[25] and meet certain eligibility guidelines.
• It offers for purchase health insurance plans for individuals who:
  • are not working
  • are employed by a small business (less than 50 employees) that uses the Connector to offer health insurance. These residents will purchase insurance with pre-tax income.^[26]
  • are not qualified under their large employer plan
  • are self-employed, part-time workers, or work for multiple employers
• It sets premium subsidy levels for Commonwealth Care.
• It defines "affordability" for purposes of the individual mandate

The Health Connector is run by the Commonwealth Health Insurance Connector Authority, an independent agency with a 10-member board. The Health Connector will make health insurance portable by allowing employees to keep the same plan even if they leave an employer. The Health Connector will also allow employees to aggregate the contributions of multiple employers, e.g. if they are part-time workers or work for multiple employers, and apply them to one insurance plan.^[25] The Health Connector is currently managed by former Tufts Associated Health Plans executive Jon Kingsdale, who serves as its executive director.^[27]

[edit] Commonwealth Care Health Insurance Program

Commonwealth Care is one of the newest subsidized health insurance programs offered by the Commonwealth, and is a key part of Health Care Reform in Massachusetts. It is designed primarily for income-eligible Massachusetts adult residents who are not otherwise eligible for MassHealth, who either do not work or who work for employers that do not offer health insurance. Specifically, it allows eligible residents access to certain subsidized private insurance health plans – currently a choice of four plans – for individuals without health insurance who make below 300% of the federal poverty level.^[24] There are no deductibles. For individuals below 150% of the federal poverty level, no premiums will be charged; for those below the poverty level, dental insurance is also provided. For those above 150% of the federal poverty level, a sliding scale premium schedule based on income is used to determine the amount of money a person contributes to their policy.^[24] Commonwealth Care for those below poverty has been available through the Connector since October 1, 2006. Plans for those between 100% and 300% of the poverty line have been available since January 1, 2007. As of Dec. 1, 2007, over 158,000 people have enrolled in Commonwealth Care.

[edit] Employer Taxes

Employers with more than ten employees must provide a "fair and reasonable contribution" to the premium of health insurance for employees.^[28] Employers who do not will be assessed an annual fair share contribution that will not exceed $295 per employee per year.^[28] The fair share contribution will be paid into the Commonwealth Care Trust Fund to fund Commonwealth Care and other health reform programs.^[24] The Division of Health Care Finance and Policy defined by regulation what contribution level meets the "fair and reasonable" test in the statute. The regulation imposes two tests. First, employers are deemed to have offered "fair and reasonable" coverage if at least 25% of their full-time workers are enrolled in the firm's health plan. Alternatively, a company meets the standard if it offers to pay at least 33% of the premium cost of an individual health plan.

There is an additional Free Rider Surcharge that can be assessed to the employer.^[29] This surcharge is different from the fair share contribution. The surcharge is applied when an employer does not arrange for a pre-tax payroll deduction system for health insurance, and has employees who receive care that is paid from the uncompensated care pool, renamed in October 2007 as the Health Safety Net.^[25] If an employee receives free care more than three times or all of an employer's employees use free care a total of five times, then the employer must pay a portion of the health care costs.^[25]

[edit] Individual taxes

Residents of Massachusetts must have health insurance coverage under Chapter 58.^[30] Residents must indicate on their tax forms for the 2007 tax year if they had insurance on December 31 2007, have a waiver for religious reasons, or have a waiver from the Connector. The Connector waiver can be obtained if the resident demonstrates that there is no available coverage that is defined by the Connector as affordable.^[24] In March 2007, the Connector adopted an affordability schedule that allows residents to seek a waiver.^[31] If a resident does not have coverage and does not have a waiver, the Department of Revenue will enforce the insurance requirement by imposing a penalty. In 2007, the penalty was the loss of the personal exemption. Beginning in 2008, the penalty will be up to half the cost of the lowest available yearly premium which will be enforced as an assessed addition to the individual's income tax, up to $912 a year.^[32]

[edit] Young Adult Coverage

Starting January 1, 2007, insurers' family coverage plans are required to cover young adults up to age 25 for up to two years past the young adult's loss of dependent status. Beginning in July 2007, the Connector offers reduced benefit plans for young adults up to age 26 who do not have access to employer-based coverage.

[edit] Implementation

The implementation of chapter 58 began in June, 2006, with the appointment of members of the Connector board, and the naming of Jon Kingsdale, a Tufts Health Plan official, as executive director of the Connector. The Board started meeting biweekly. On July 1, MassHealth began covering dental care and other benefits, and began enrolling children between 200% and 300% of the poverty level.

The federal Centers for Medicare and Medicaid Services approved the state's waiver application on July 26, 2006, allowing the state to begin enrolling 10,500 from the waitlist for the MassHealth Essential program, which provides Medicaid coverage to long-term unemployed adults below the poverty line.^[33]

In September, 2006, the Division of Health Care Finance and Policy issued regulations defining "fair and reasonable" for the fair share assessment. The regulations provide that companies with 11 or more full-time equivalent employees will meet the “fair and reasonable” test if at least 25 percent of those employees are enrolled in that firm’s health plan and the company is making a contribution toward it. A business that fails that test may still be deemed to offer a “fair and reasonable” contribution if the company offers to pay at least 33 percent of an individual’s health insurance premium.^[34]

Also in September, the Connector Board set premium levels and co-payments for the state subsidized Commonwealth Care plans. Premiums will vary from $18 per month, for individuals with incomes 100%-150% of the poverty line, to $106 per month for individuals with incomes 250%-300% of poverty. The Connector approved two co-payment schemes for plans for people 200%-300% of poverty. One plan will have higher premiums and lower co-payments, while a second choice will have lower premiums and higher co-payments.^[35] Four managed care plans began offering Commonwealth Care on November, 1, 2006. Coverage for people above 100% of poverty up to 300% of poverty began on February 1, 2007. As of December 1, 2007, around 158,000 people were enrolled in Commonwealth Care plans.

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Initial bids received by the Connector showed a likely cost for the minimum insurance plan of about $380 per month. The Connector rejected those bids, and asked insurers to propose less expensive plans. New bids were announced on March 3, 2007. The Governor announced that "the average uninsured Massachusetts resident will be able to purchase health insurance for $175 per month."^[36] But plan costs will vary greatly depending on the plan selected, age and geographic location, ranging from just over $100 per month for plans for young adults with high copayments and deductibles to nearly $900 per month for comprehensive plans for older adults with low deductibles and copayments. Co-payments, deductibles and out-of-pocket contributions may vary among plans. The proposed minimum creditable coverage plan would have a deductible no higher than $2,000 per individual, $4,000 per family, and would limit out-of-pocket expenses to a $5,000 maximum for an individual and $7,500 for a family. Before the deductible applies, the proposed plan includes preventive office visits with higher co-payments, but would not include emergency room visits if the person was not admitted.^[37]

[edit] Outcomes

From 6.4%-10.4% in fall 2006, the number of uninsured Massachusetts residents dropped to 5.4%-5.7% in fall 2007, depending on the methodology used.^[38] Approximately 3% of taxpayers were determined by the Commonwealth to have access to affordable insurance but paid an income tax penalty instead. Approximately 2% were determined not to have access to affordable insurance, and a small number opted for a religious exemption to the mandate.^[39] As of June 30, 2008, the estimated number of uninsured had dropped to 2.6%.^[39] Comparing the first half of 2007 to the first half of 2008, spending from the Health Safety Net Fund dropped 38% as more people became insured.^[39] The Fund (which replaced the Uncompensated Care Pool or Free Care) pays for medically necessary health care for those who do not have access to health insurance, and the underinsured.^[40]

In February 2008 the Boston Globe reported that Commonwealth Care covered 169,000 people and had a projected cost of $618 million for the fiscal year. By June 2011 enrollment is projected to grow to 342,000 people at an annual expense of $1.35 billion. The original projections were for the program to ultimately cover approximately 215,000 people at a cost of $725 million.^[41] Enrollment in the Commonwealth Care Health Insurance Program reached approximately 170,000 by April 1 of 2008. Enrollment in the Commonwealth Choice Plans, offered through the Commonwealth Health Insurance Connector, was almost 18,000 by the same date. Enrollment in the Commonwealth's Medicaid program, MassHealth, was up by 50,000 by January 2008. Data from the Massachusetts Association of Health plans suggest that enrollment in employer-sponsored health insurance was up by 85,000, but the number of people with individual coverage increased by less than 10,000.^[42]

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In March 2008 the Boston Globe reported that some "safety-net" hospitals serving low-income individuals in urban areas were facing budget shortfalls due to the combination of reduced "free-care" payments from the state and low enrollment in Commonwealth Care. The reduced state payments anticipated that by reducing the number of uninsured people Commonwealth Care would reduce the amount of charity care provided by hospitals.^[43] In a subsequent story that same month the Globe reported that Commonwealth Care faced a short-term funding gap of $100 million and the need to obtain a new three-year funding commitment from the federal government of $1.5 billion. The Globe reported that a number of alternatives were under consideration for raising additional funding, including a $1 per pack increase in the state's cigarette tax. Health care costs in the state were rising at an annual rate of 10 percent, and the state budget deficit was $1.3 billion.^[44]

The influx of more than a quarter of a million newly insured residents has led to overcrowded waiting rooms and overworked primary-care physicians who were already in short supply in Massachusetts.^[45]

[edit] Possible legal challenges

A legal challenge to the law may arise under the presumption that it is an attempt to preempt the federal Employee Retirement Income Security Act (ERISA).^[46] A somewhat similar law with respect to employer spending on health insurance in Maryland was struck down by a federal judge on July 19, 2006.^[46] The law in question had required employers with more than 10,000 employees to spend no less than 8% of their payroll on health insurance benefits.^[46] The ruling effectively delineated that states cannot interfere in the administration of employer provided benefits to their employees and such interference was a violation of federal law.^[46] However, some policy analysts argue that the Massachusetts reform differs in that it does not mandate business to change coverage, but rather, simply imposes a tax – one of the states' rights guaranteed by the 10th amendment of the Constitution.^[47]

[edit] See also

• Employee Retirement Income Security Act (ERISA)
• Medicaid
• Medicare (United States)
• Massachusetts general election, 2006
• California Speaks - Citizen discussion on similar legislation in California, 2007
• United States National Health Insurance Act

[edit] References

[edit] External links

• Commonwealth Health Insurance Connector Authority Official web site. Describes the Massachusetts health reform act, authorized health insurance plans, regulations issued, board members and board minutes.
• Health Reform Timeline Month-by-month chronology of the passage and implementation of the Massachusetts health reform law.
• About.com's Pros & Cons of Massachusetts' Mandatory Health Insurance Program
• Affordable Coverage Today Health Care for All. (A health care advocacy group in Massachusetts)
• EOHHS Health Reform Reports to Massachusetts legislature Bi-monthly progress reports on the implementation of Massachusetts health reform.
• The Massachusetts Health Reform Law: Public Opinion and Perception A Report for the Blue Cross Blue Shield of Massachusetts Foundation. November 2006.
• Lessons learned to date from the Massachusetts Healthcare Reform by Celia Wcislo (August 2007) (Celia Wcislo, is a Board Member of the Massachusetts Commonwealth Health Insurance Connector Authority) Publisher: Local 1199 Service Employees International Union (SEIU) United Healthcare Workers East.
• Presentation by Governor Mitt Romney, January 26, 2006 Massachusetts Health Care Reform. The Heritage Foundation, Washington D.C. (Using Power Point visuals. Available as video, or audio MP3)
• Bela Gorman, "Update on Massachusetts Health Care Financing Reform," Health Watch, Issue No. 57, Society of Actuaries, January 2008