Universal Health Care Coverage: Employer Perspective David Harlow JD MPH THE HARLOW GROUP LLC Presented at: Business Lawyers Network September 20, 2007

2 T HE H ARLOW G ROUP LLC MA Universal Health Care Law Goals Preserve Federal dollars under Medicaid “1115” waiver Cover 95% of the 550,000 residents of MA without health care coverage (as of September, nearly 200,000 newly insured folks) Methods Free insurance replacing free care for the needy Sticks and carrots for employers Carrots for insurers

3 T HE H ARLOW G ROUP LLC Elements of Law (1 of 3) Redeploy public funds to more effectively cover low-income populations Promote individual responsibility by requiring that everyone who can afford health insurance must buy it Commonwealth Health Insurance Connector will connect individuals with affordable, “certified” health insurance products

4 T HE H ARLOW G ROUP LLC Elements of Law (2 of 3) Merger of non-group and small-group markets in July % reduction in non-group premiums predicted (hasn’t happened) HMOs may offer plans linked to health savings accounts (HSAs) Young adults May stay longer on parents’ plan (2 years after loss of dependent status or age 25, whichever comes first) year-olds may purchase lower-cost, specially- designed products

5 T HE H ARLOW G ROUP LLC Elements of Law (3 of 3) Moratorium on adding new mandated benefits through 2008 Subsidized plans for residents in need Expanded MassHealth (Medicaid) programs Details beyond scope of this presentation

6 T HE H ARLOW G ROUP LLC Individual mandate (1 of 3) July 1, 2007: All residents of MA must obtain healthcare coverage if it is affordable (defined in DHCFP regulations; calculator provided on Connector website)calculator Example: Boston couple over 50 with $80,000 annual income is exempt. Amount they can “afford” is $500/mo. Predicted minimum premium cost: $570/mo. Mandate is intended to stabilize risk pools by including the super-healthy and super-unhealthy

7 T HE H ARLOW G ROUP LLC Individual mandate (2 of 3) Some of the money spent on “free care” in hospitals in past years will pay for insurance premiums for residents eligible for free care MA residents will have to confirm on their state tax returns, beginning with 2007 returns (filed in 2008), that they have health insurance coverage. This will be verified against a database of health insurance coverage for all individuals

8 T HE H ARLOW G ROUP LLC Individual mandate (3 of 3) This requirement will be enforced with financial penalties for noncompliance: Tax year 2007: Loss of personal exemption (value: >$200) Subsequent years: 50% of premium for health insurance for each month without health insurance

9 T HE H ARLOW G ROUP LLC Employer responsibility (1 of 3) Fair Share Contribution: Every employer with more than 10 FTE employees must either Provide health insurance for employees and make “fair and reasonable” contribution to its cost (defined in next slide) OR, if it does not, Pay a “fair share” contribution of $295 per employee

10 T HE H ARLOW G ROUP LLC Employer responsibility (2 of 3) “Fair and reasonable” contribution means At least 25% of full-time (35 hrs./wk.) employees participate in the employer’s health plan; or The employer offers to pay at least 33% of the premium for all full-time employees employed at least 90 days during a base year period (Oct. 1, 2006-Sept. 30, 2007)

11 T HE H ARLOW G ROUP LLC Employer responsibility (3 of 3) Fair share contribution represents a portion of the cost paid by the state for “free care” used by workers whose employers do not provide health insurance At present, a portion of health insurance premiums paid by employers go to fund the free care pool It’s only fair to require a similar contribution from employers who do not provide insurance benefits Paperwork: HIRD forms To be collected from employees and retained 3 years Employer forms to be filed

12 T HE H ARLOW G ROUP LLC Free rider surcharge (1 of 2) Surcharge imposed on employers who do not provide insurance and whose employees use free care Triggered if One employee receives free care more than three times in one year, or A company has five or more instances of employees receiving free care in one year

13 T HE H ARLOW G ROUP LLC Free rider surcharge (2 of 2) Surcharge to range from 10% to 100% (TBD by DHCFP) of state’s cost of free care provided, with the first $50K per employer excepted Revamped free care pool Old: Uncompensated Care Pool paying a portion of hospital charges New: Health Safety Net fund paying under standard fee schedule for hospital services Over time, more people will have coverage, less free care will be provided, and money in the pool will be redirected to fund subsidized health insurance

14 T HE H ARLOW G ROUP LLC Cafeteria plans - mandatory Mandatory offer of cafeteria plans (“Section 125” plans), effective July 1, 2007 (changed from original January 1, 2007 deadline), for employers with more than 10 FTE employees 1,100 employers signed up by July 1 Tax benefit: Employees’ premium expense will drop 28 to 48 percent since they pay with pre-tax dollars. Employers who offer a pre-tax payroll deduction plan also save 7.65 percent since their FICA contribution is reduced.

15 T HE H ARLOW G ROUP LLC Health Care Quality and Cost Council New state board to Set cost containment and quality improvement goals for providers Host consumer-friendly website with provider- specific cost and quality data

16 T HE H ARLOW G ROUP LLC The Connector (1 of 3) Will act as intermediary and administrator for the merged small group and non-group markets (employers with up to 50 employees) Health plans will include the usual suspects, but at (supposedly) lower premium levels, plus some new choices...

17 T HE H ARLOW G ROUP LLC The Connector (2 of 3) High-deductible health plans coupled with HSAs, to be offered through cafeteria plans (HSAs may be sold by HMOs) Consistent with current federal priorities – emphasizing individual responsibility and choice Favorable tax treatment of HSAs now mandated at state level, and recently clarified at federal level Query: Will people use these plans appropriately, or will they delay care (and then require more costly care) because they have to actually write the check?

18 T HE H ARLOW G ROUP LLC The Connector (3 of 3) “High Value” plans (aka restricted or tiered panel plans), available at lower cost Exception to “any willing provider” (AWP) rule which requires health insurers to contract with all providers interested in doing so Stripped-down plans for year olds, offering first dollar coverage for PCP visits

19 T HE H ARLOW G ROUP LLC Issues for employers “Pay or Play” Cafeteria plans ERISA preemption? Timing: Now! Enrollment in plans must be before December 31, which means much is to be done by mid-October Cafeteria plans, employee enrollment, payroll deductions, filing of plan documents and employee and employer information forms, etc.

20 T HE H ARLOW G ROUP LLC On-line resources Commonwealth Connector Health Care Quality and Cost Council &L0=Home&sid=Ihqcc &L0=Home&sid=Ihqcc A Healthy BlogA Healthy Blog (Health Care for All)

21 T HE H ARLOW G ROUP LLC Questions / Discussion David Harlow JD MPH T HE H ARLOW G ROUP LLC