A Summary of the Massachusetts Health Care Reform Law, Ch. 58 of the Acts of 2006: An Act Providing Access to Affordable, Quality, Accountable Heath Care
[August 15, 2006]
Kristin Wildman Shirahama

On April 12, 2006, Governor Mitt Romney signed into law landmark legislation that would reform the reform administration of health care in Massachusetts and provide nearly universal health care coverage to state residents. This legislation mandates the purchase of individual health insurance and provides government subsidies to ensure affordability. The Health Care Reform Law will require the participation by both individuals and employers. Implementation will begin in phases starting October 1, 2006 with full implementation expected by July 1, 2007.

Individual's Responsibility

Beginning in July 2007, all residents 18 years of age or older must obtain health coverage. This mandate will be enforced through the state income tax system. Subject to limited exemptions, residents will be required to report on their state income tax returns whether they have maintained health insurance that qualifies as “creditable coverage” over the prior year. In 2007, the penalty for non-compliance will be loss of the personal exemption. In 2008 and after, the penalty will be half the cost of the lowest available yearly premium.

Employer Responsibility

In addition to individual responsibility, employers will be mandated to contribute to the cost of health insurance. Employers with more than 10 employees must provide a “fair and reasonable” contribution toward health insurance coverage or otherwise pay a “Fair Share” contribution to the state of up to $295 annually per employee, prorated for part-time employees. Employers in this category will also be charged a surcharge if their employees use a certain amount of free care each year.

MassHealth Expansion

MassHealth coverage is also expanded under the Health Care Reform Law. Children in families earning up to 300% of the Federal Poverty Level (about $60,000 for a family of four), will be eligible, effective July 1, 2006. In addition the enrollment cap on MassHealth Essential (unemployed), CommonHealth (people with disabilities) and HIV programs will be increased. Also restored are dental, dentures, eyeglasses benefits previously cut in 2002 for adults on MassHealth.

Commonwealth Health Insurance Connector

The Health Care Reform Law creates the Commonwealth Health Insurance Connector to “connect” individuals to insurance products by offering affordable quality insurance products. The Connector, governed by a board of eleven members, is structured to work as an independent authority. Both individuals and small businesses (50 or fewer employees) can purchase products through the connector. Employers with more than 10 employees will be required to offer a Section 125 “cafeteria plan” that permits workers to purchase health care with pre-tax dollars. Lower cost products for individuals ages 19 through 26 will be offered through the connector.

The statute provides for open enrollment for purchase of small group market insurance plans through the Connector from March 1, 2007 through May 31, 2007. The Connector will begin offering these Plans to small groups on April 1, 2007. The purchase of subsidized insurance under the Commonwealth Care Health Insurance Program (discussed below) will begin on October 1, 2006.

Subsidized Health Insurance

Subsidized health care insurance will be provided through the Commonwealth Care Health Insurance Program which will subsidize coverage to low income uninsured individuals and their families living below 300% of the federal poverty level. There will be no deductibles and people living below 100% of the federal poverty level will not be responsible for premiums. Premiums will be based on a sliding scale for individuals and families living above 100% of the federal poverty level and below 300%. To be eligible for the subsidy individuals must meet the following criterion: (1) have been a Massachusetts resident for the last six months; (2) not be eligible for MassHealth, Medicare, or the Child Health Insurance Program (CHIP); (3) family member’s employer must not have provided health insurance coverage in the last six months for which the individual is eligible and of which the employer covers at least 20% of the annual premium cost of a family health insurance plan or at least 33% of an individual health insurance plan (which may be waived in certain circumstances); (4) and must not have declined employer coverage in favor of a financial incentive. Commonwealth Care Health Insurance Program plans will be offered by managed care organizations (Neighborhood Health Plan, Boston Medical Center Health Net, Network Health, and Fallon Community Health Plan), which have provided Medicaid managed care insurance under contract for MassHealth enrollees.

Free Care Pool

Providers are currently reimbursed for uncompensated care from the Free Care Pool. The Free Care Pool will be transitioned to a new Safety Net Care Fund as more uninsured gain coverage and uncompensated care drops. The Safety Net Care Fund will also include Medicaid funds. Hospitals and community health centers will be supported through a grant program for safety net services.

Insurance Market Reforms

The Health Care Reform Law includes several insurance market reforms. Insurers are encouraged to create plans with lower premiums that still provide comprehensive benefits. Current mandated health benefits, including mental health care, are protected. Non-group individual health insurance market will be merged into the small group market. This change is projected to cut individual premiums by roughly 25%. New, lower-premium plans will be created for individuals age 19 through 26 years old. Health plans will be required to offer family coverage to young adults for two years after they lose their dependent status or up to age 25, whichever comes first.

ERISA

The Employee Retirement Income Security Act of 1974 is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans. Because the Health Care Reform Law relates to an employee benefit plan, the new law may be challenged on the grounds that some of its provisions are preempted by ERISA. Stay tuned.

Conclusion

The new law represents a bold effort to bring health insurance coverage to all Massachusetts residents and families. Many questions remain to be answered about the implementation of this program over the next two years.

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