How Massachusetts Health Care Changes Affect Your Business
by Shel Horowitz
Why is it that the individuals who are the best health risks, those who are most desirable in an insurance risk pool, the ones who are most likely to be without health insurance?
There are a number of reasons according to Cheryl Brooks of MillBrook Benefits and Insurance Services, LLC, brought to the FBC’s October gathering by sponsor Axia Insurance. Consider that adults age 18-34 represent almost 87% of the nearly 500,000 uninsured individuals in the Commonwealth. Many of these adults are employed but 31% of them work for employers who not offer coverage or work part-time and are not eligible. The shift in jobs from manufacturing to the service sector and a decline in employer sponsored health insurance are also contributors. Effective with Massachusetts’ new requirement for “universal” coverage, insurers are mandated to address the uninsured with lower cost products. “But we don’t know what they’re going to look like or how much they are going to cost”, notes Brooks.
She is, however, concerned about the impact on small business. One of the major provisions will merge the risk pools for small businesses (those with up to 51 employees) with the non-group market which consists of individuals who buy insurance directly from a carrier. These individuals are generally considered higher risk purchasers and some actuaries have projected that premiums for small businesses will increase slightly as a result.
The push for reform in Massachusetts came about because of a number of factors. It is estimated that 31% of employers don’t offer coverage or their coverage does not extend to part-timers (who for retail giants like Wal-Mart, represent a major chunk of the workforce). Uninsured workers account for a billion dollars a year in health care, financed by us, and this number is growing. Skyrocketing premiums, with double digit increases and the highest per capita healthcare spending in the nation don’t help. Add the threat of a loss of $385 million in federal Medicaid funding and Massachusetts was ripe for reform.
A major feature of the law is the individual mandate which requires all residents to have coverage by July 1, 2007. In year one, uninsured individuals will lose their personal State tax exemption and additional penalties will apply in following years.
Employers who do not offer coverage will face penalties as well. These include a fair share assessment of $295 per employee and a requirement to pay between 10% and 100% of the cost if these uncovered employees access free care at a hospital. Other employer responsibilities included implementing a Section 125, premium only plan , non-discriminatory premium contributions and additional reporting requirements.
And Brooks has a few questions we all need to keep in mind. “Is this program going to be financially sustainable? Where will the money come from? How do you get the person who gets free care now to accept personal responsibility and buy insurance? They may not file taxes and the loss of a deduction may not be important to them.”