Massachusetts health care reform

Massachusetts health care reform law was enacted in 2006, and requires nearly every resident of Massachusetts to obtain or purchase health insurance coverage. Through the law, Massachusetts provides nearly free health care for residents earning less than the federal poverty line, and subsidized access to health care for those earning up to three times the poverty threshold. As of the end of 2007, the law is credited with covering an additional 300,000 Massachusetts residents. The law established a new quasi-public regulatory authority, the Commonwealth Health Insurance Connector Authority which offers the subsidized coverage and facilitates the selection and purchase of private insurance plans by individuals and small businesses.^[1][2] Incentives for residents to obtain health insurance coverage include penalties for failing to obtain an insurance plan, of $219, for 2007, the amount of an individual's Massachusetts annual income tax personal tax exemption; in 2008, penalties increase by monthly increments, and can be up to half of the cost of an individual's health insurance plan.^[3][4]

The law reform 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 statue (Chapters 324 and 450 of the Acts of 2006, and chapter 205 of the Acts of 2007).^[5]

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Background

As of March 2006, there were around 497,900 uninsured residents of Massachusetts.^{[citation needed]} Some of those low income residents and non-residents who are uninsured commonly utilize emergency rooms as a source of primary care because of their lack of insurance coverage.^[6] Massachusetts hospitals are required to provide care even if a patient cannot pay for it regardless of residency status.^[7] As a result, hospitals have been left with unpaid bills and mounting expenses to care for the uninsured.^[8]

In Massachusetts, an approximately $600 million fund known as the Uncompensated Care Pool (or "free care pool") is used to partially reimburse hospitals and health centers for these expenses and the expenses of non-residents. The fund is raised through an annual assessment on insurance providers and hospitals, plus contributions of state and federal tax revenue. MIT professor Jonathan Gruber studied the state's population and health care needs and determined that there was enough money in the "free care pool" to pay for reform legislation without requiring additional funding or taxes.^[9]

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, a broad coalition of health activists introduced a bill that expanded MassHealth (Medicaid) coverage, increased health coverage subsidy programs and required employers to either provide coverage or pay an assessment to the state. The coalition stated they would gather signatures to place their proposal on the ballot in November 2006 if the legislature did not enact comprehensive health access reform. The Blue Cross Blue Shield Foundation also sponsored a study, "Roadmap to Coverage," that set out a number of methods to expand coverage to everyone in the Commonwealth.^[10]

The state also faced pressure from the federal government, which insisted that changes be made to the federal waiver that allows Massachusetts to operate an expanded Medicaid program. Under the existing waiver, the state was receiving $385 million in federal funds to assist health plans operated for the uninsured by two public hospital systems. The federal authorities directed the state to shift those funds to insurance coverage.

Legislation

These political forces converged in fall 2005 as the House and Senate passed health reform bills that drew on proposals of the Governor, the activist coalition, and legislative initiatives.

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.^[11] He vetoed 8 sections of the health care legislation, including the employer assessment.^{[12] [13]} 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.^[14][15] The legislature promptly overrode six of eight gubernatorial section vetoes, on May 4, 2006, and by mid-June 2006 had overidden the remaining two.^[16]

Statute

The enacted statute, chapter 58 of the acts of 2006, established a system to mandate individuals, with a few exceptions, purchase or obtain health insurance through either a private or public insurance plan.^[17] Chapter 58 has several key provisions: the creation of the Commonwealth Health Insurance Connector Authority; the establishment of the subsidized Commonwealth Care Health Insurance Program; the employer Fair Share Contribution; 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.^[17] 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.^[18] 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.

Commonwealth Health Insurance Connector Authority

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

• It runs the Commonwealth Care program for low-income residents (below 300% of the poverty level) who do not qualify for MassHealth.^[19]
• 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.^[20]
  • 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 Connector is run by the Commonwealth Health Insurance Connector Authority, an independent agency with a 10-member board. The Connector will make health insurance portable by allowing employees to keep the same plan even if they leave an employer. The 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.^[19] The Connector is currently managed by former Tufts Associated Health Plans executive Jon Kingsdale, who serves as its executive director.^[21]

On October 28, 2006, the Connector Authority Board held its annual meeting, a day-long retreat to plan its actions through 2007. At the meeting, CEO Jon Kingsdale distributed a schedule of major activities.^[22]

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. ^[18] 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.^[18] 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.

Employer Taxes

Employers with more than ten employees must provide a "fair and reasonable contribution" to the premium of health insurance for employees.^[23] Employers who do not will be assessed an annual fair share contribution that will not exceed $295 per employee per year.^[23] The fair share contribution will be paid into the Commonwealth Care Trust Fund to fund Commonwealth Care and other health reform programs.^[18] 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.^[24] 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.^[19] 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.^[19]

Individual Taxes

Residents of Massachusetts must have health insurance coverage under Chapter 58.^[25] 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.^[18] By June 2007, the Connector is scheduled to issue its affordability schedule that will allow residents to seek a waiver. 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 will be the loss of the personal exemption. Beginning on January 1 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.^[26]

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 will offer reduced benefit plans for young adults up to age 26 who do not have access to employer-based coverage.

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.^[27]

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.^[28]

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.^[29] Four managed care plans began offering Commonwealth Care for people up to the poverty line 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.

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."^[30] 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.^[31]

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).^[32] 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.^[32] 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.^[32] 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.^[32]

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

References

1. ^ LeBlank, Steve; (Associated Press). "Timing of health care law's penalties could pose risks for Romney", Boston Globe, November 9, 2007. Retrieved on 2007-11-18. 
2. ^ Rainey, James. "Romney casts a cool eye on a former triumph", Los Angeles Times, November 13, 2007. Retrieved on 2007-11-18. 
3. ^ Find Insurance: Individuals & Families: Act Now. Commonwalth Health Insurance Connector. Retrieved on 2007-11-15.
4. ^ Dembner, Alice. "Insurance deadlines – Nov. 20 and Dec. 31", Boston Globe, November 15, 2007. Retrieved on 2007-11-18. 
5. ^ For text of the laws, provided by The General Court of The Commonwealth of Massachusetts
   
   • Summary of the Massachusetts Health Reform Law.
     
   • Chapter 58 of the Chapter 58 of the Acts of 2006 An Act Providing Access to Affordable, Quality Accountable Health Care
     

   and subsequent amendments and technical corrections bills enacted in the same legislative session:
   

   • Chapter 324 of the Acts of 2006 An Act Relative to Health Care Access.
     
   • Chapter 450 of the Acts of 2006 An Act Further Regulating Health Care Access.
     
   • Chapter 205 of the Acts of 2007 An Act Further Regulating Health Care Access.
     
6. ^ http://www.businessweek.com/investor/content/apr2006/pi20060404_152510.htm
7. ^ http://www.bphc.org/howto/ins_mucp.asp
8. ^ http://www.npr.org/templates/story/story.php?storyId=5330854
9. ^ http://www.opinionjournal.com/editorial/feature.html?id=110008213
10. ^ http://www.roadmaptocoverage.org
11. ^ http://news.yahoo.com/s/ap/massachusetts_health;_ylt=AkMg0NHWbbPPMpo5ese19mKs0NUE;_ylu=X3oDMTA2Z2szazkxBHNlYwN0bQ--
12. ^ http://www.boston.com/news/local/massachusetts/articles/2005/11/04/house_approves_healthcare_overhaul/
13. ^ http://today.reuters.co.uk/news/newsArticle.aspx?type=healthNews&storyID=2006-04-12T222644Z_01_N12342304_RTRIDST_0_HEALTH-MASSACHUSETTS-DC.XML&archived=False
14. ^ http://www.thetranscript.com/headlines/ci_3706699
15. ^ http://news.bostonherald.com/localPolitics/view.bg?articleid=134877
16. ^ See chapter 58 text for overides. Chapter 58, Acts of 2006: The six prompt overides were noted at the foot of the chapter: Approved (in part) April 12, 2006. Disapproved sections 5, 27, 29, 47, 112, 113, 134 and 137
    'Sections 5, 29, 47, 113, 134 and 137 overidden on May 4, 2006.
17. ^ ^{a b} 2006 Mass. Acts Chp. 58
18. ^ ^{a b c d e} Report from Massachusetts Secretary of Health and Human Services Timothy Murphy, to the Massachusetts General Court, "Chapter 58 Implementation Update" (June 12, 2006).
19. ^ ^{a b c d} Massachusetts General Court, Committee on Health Care Financing, "Health Care FAQ" (April 4, 2006) PDF
20. ^ Mitt Romney, "Health Care for Everyone?" Wall Street Journal (April 11, 2006)
21. ^ http://www.mass.gov/eoaf/pressreleases/new_healthcare_director.html
22. ^ Health Care For All blog report, (October 29, 2006)
23. ^ ^{a b} 2006 Mass. Act Chp. 58, sec. 47
24. ^ 2006 Mass. Acts Chp. 58, sec. 44
25. ^ 2006 Mass. Acts Chp. 58, sec. 12
26. ^ Health Care for All "Massachusetts's Health Care Reform Law Fact Sheet" PDF
27. ^ Press Release on waiver approval, July 28, 2006
28. ^ Press Release on Fair Share regulations, September 8, 2006
29. ^ Health Care For All's Commonwealth Care page
30. ^ Press release on minimum creditable coverage plans, March 3, 2007
31. ^ Dembner, Alice. Outline for new insurance plan proposed Boston Globe. January 19, 2007. Retrieved January 19, 2007.
32. ^ ^{a b c d} USA Today July 19, 2006: Walmart Healthcare Litigation