Massachusetts Health Care Reform: How it was Crafted, Why it has Lasted Jim Klocke Executive Vice President, Greater Boston Chamber of Commerce

Today’s Presentation Baseline Conditions Pre-Reform Baseline Conditions Pre-Reform Key Elements of the Massachusetts Plan Key Elements of the Massachusetts Plan How It Came Together How It Came Together Recent Issues Recent Issues Suggestions for the Federal Effort Suggestions for the Federal Effort

Baseline Conditions Pre-Reform— Massachusetts in 2005 Percent of population with health insurance well above national average Percent of population with health insurance well above national average Availability of employer-provided coverage well above national average Availability of employer-provided coverage well above national average Existing Free Care Pool—large and established, funding from Existing Free Care Pool—large and established, funding from 1) state and federal governments, 1) state and federal governments, 2) hospital payments, 2) hospital payments, 3) insurer payments 3) insurer payments (latter two passed on to employers who contribute to employee health insurance premiums)

Key Elements of Massachusetts Reform Plan Individual health insurance mandate Individual health insurance mandate Subsidies—Free coverage for individuals with incomes up to 150% FPL, scaled subsidies for those with incomes 151% - 300% FPL Subsidies—Free coverage for individuals with incomes up to 150% FPL, scaled subsidies for those with incomes 151% - 300% FPL Companies required to provide pre-tax access to health insurance via Section 125 plans—if not, have to pay workers’ emergency room bills (this provision does not require an employer contribution to employee health insurance) Companies required to provide pre-tax access to health insurance via Section 125 plans—if not, have to pay workers’ emergency room bills (this provision does not require an employer contribution to employee health insurance) “Fair Share” assessment to ensure that all firms contribute to free care pool (not an employer mandate) “Fair Share” assessment to ensure that all firms contribute to free care pool (not an employer mandate)

“Fair Share” Assessment Amount calculated each year by formula in law tied to free care pool usage Amount calculated each year by formula in law tied to free care pool usage Amount capped at $295/worker/year Amount capped at $295/worker/year Paid by firms with 11+ employees that don’t make a “fair and reasonable” contribution to employee health insurance premiums—defined in regulations according to take-up rate and % of employer subsidy Paid by firms with 11+ employees that don’t make a “fair and reasonable” contribution to employee health insurance premiums—defined in regulations according to take-up rate and % of employer subsidy Vast majority of firms are in compliance Vast majority of firms are in compliance

How It Came Together Compromise Compromise Major stakeholders (government leaders, advocacy organizations, business community, provider community) got some but not all of what each was looking for Patient Negotiations Patient Negotiations Months of negotiations followed initial proposals made by Governor, Speaker, Senate President Guiding Principle—Keep everyone at the table Guiding Principle—Keep everyone at the table One of the biggest reasons Massachusetts plan was achieved

Recent Issues Fair Share Assessment Fair Share Assessment Summer 2008—Patrick Administration proposed expanded definition of “fair and reasonable” premium contribution Summer 2008—Patrick Administration proposed expanded definition of “fair and reasonable” premium contribution Issues—number of firms paying under current definition, ERISA risk, prospect of penalties on high-benefit firms Issues—number of firms paying under current definition, ERISA risk, prospect of penalties on high-benefit firms After extensive discussions, modified definition adopted After extensive discussions, modified definition adopted Minimum Creditable Coverage Minimum Creditable Coverage What must a health plan include to comply with the individual mandate?—legal lists vs. actuarial equivalents What must a health plan include to comply with the individual mandate?—legal lists vs. actuarial equivalents Health Insurance Premium Inflation Health Insurance Premium Inflation Is, and will remain, largest challenge for Massachusetts plan because of individual mandate Is, and will remain, largest challenge for Massachusetts plan because of individual mandate

Suggestions for the Federal Effort If your experience is like ours, “reform” will evolve as proposals are scrutinized, criticized, improvised If your experience is like ours, “reform” will evolve as proposals are scrutinized, criticized, improvised A bill with 1-3 significant reforms is preferable to a “comprehensive reform” bill, because implementation will bring both positive and negative surprises A bill with 1-3 significant reforms is preferable to a “comprehensive reform” bill, because implementation will bring both positive and negative surprises The Perfect is the Enemy of the Good, And of Final Passage The Perfect is the Enemy of the Good, And of Final Passage