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MASSACHUSETTS HEALTH CARE REFORM
In April 2006. Massachusetts signed into law the first comprehensive health care reform bill - Chapter 58 of the Acts of 2006: An Act Promoting Access to Affordable, Quality, Accountable Health Care. The purpose of Health Reform Law is to increase insurance coverage for the residents of Massachusetts through subsidized health insurance for residents earning less than 300% of the Federal Poverty Level and affordable insurance for all other residents who are not eligible for insurance through their employers.
This means that, as of July 1, 2007 all residents of the Commonwealth are required to maintain health insurance. As it relates to employers, the law introduces five major responsibilities:
Fair Share Contribution - Effective on 10/1/06 - Employers with 11 or more full time equivalent employees must make a "fair and reasonable contribution" to health coverage. Employers who do not make a "fair and reasonable contribution" will be assessed an amount not to exceed $295/employee/year. Current regulations state that employers are making a "fair and reasonable contribution" if:
- At least 25% of the business' full time (35+ hrs/wk) employees are enrolled in the business' group health plan; or
- The employer offers to pay at least 33% of the individual premium for its full time employees.
- Under the regulations, part-time, seasonal and temporary workers are not counted when determining the 25% enrollment test or the 33% contribution test
However, part-time workers are counted in determining whether an employer has 11+ FTEs. For example, an employee who works half the hours of a full-time employee would be considered 0.5 FTE. Moreover, if an employer does not make a fair and reasonable contribution to health coverage for its full time employees, the employer will be required to pay the assessment on both its part-time and full-time workers. The assessment will be pro-rated based on the actual number of hours worked.
Free Rider Assessment - Effective 7/1/07 - Employers with more than 10 employees who do not comply with the Section 125 mandate (described below) will be assessed a penalty if (1) their employees and their dependents access the Uncompensated Care Pool a total of 5 times per year or any one employee or his dependents accesses the UCP 3 times in one year and (2) the total claims billed to the UCP exceed $50,000.
Regulations set the penalty at 10-55% of the cost of care, depending on the size of the employer, the number of visits or admissions paid for by the UCP, compliance with the Health Insurance Responsibility Disclosure requirements, and whether the employer was subject to the assessment during the prior year. Note: These implementing regulations were recently repealed due to a Legislative change in the effective date of the assessment. The regulations are expected to be reissued in the spring.
Section 125 Plans - Effective 7/1/07 - Employers with more than 10 employees must establish a Section 125 Plan in accordance with regulations issued by the Connector. These regulations require employers to allow most employees to purchase health insurance coverage on a pre-tax basis through a payroll deduction. Employers with benefit-ineligible employees can comply with these requirements with respect to those employees by signing up with the Connector. Employers with less than 50 employees can also use the Connector for their benefit-eligible employees.
Equitable Coverage - Effective 7/1/07 - Employers must make available to any full-time employee the same fully-insured insurance product that they offer to any other full-time employees. Also, employers are prohibited from making a lower premium contribution to a lower-wage full-time employee than they do for a higher-wage full-time employee for the same product. However, employers may have different contribution policies for workers covered by collective bargaining agreements.
The Division of Insurance is expected to issue guidance clarifying key issues related to this requirement (definition of full-time, use of probationary periods, etc).
Dependent Coverage - Effective 1/1/07 - Employers must cover dependents until the day before their 26th birthday or 2 years after loss of dependent status under the IRS code, whichever comes first.
Health Insurance Responsibility Disclosure
- Employers with more than 10 employees are required to annually report to the state whether they are in compliance with the Section 125 mandate. (Effective 7/1/2007)
- Employers with more than 10 employees are required to collect signed statements from employees who decline coverage. The employer must retain the form for 3 years and provide it to the state upon request. (Effective 7/1/2007)
- Employers (or their carrier acting on behalf of the employer) are required to issue employees ?Health Insurance 1099s? on an annual basis. Social Security Numbers cannot be included on the form. (Effective 1/1/2008)
Regulations and forms implementing these requirements are expected to be issued soon. Meanwhile, regulations implementing this law continue to be finalized, so we will continue to provide updates to this Web site as information becomes available. At the same time, we encourage you to contact one of our consultants to ensure that you are compliant.
For additional information, we encourage you to review the following documents issued by the Commonwealth of Massachusetts:
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