Massachusetts health care reform

Massachusetts health care reform law 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.  The law requires nearly all residents of Massachusetts to purchase health insurance or obtain coverage through State sponsored insurance for those with low incomes. In October, 2006 and January, 2007, technical corrections bills to the statue were enacted (Chapters 324 and 450 of the Acts of 2006).

Background
As of March 2006, there were around 497,900 uninsured residents of Massachusetts. 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. Massachusetts hospitals are required to provide care even if a patient cannot pay for it regardless of residency status. As a result, hospitals have been left with unpaid bills and mounting expenses to care for the uninsured.

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.

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.

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.

On April 12, 2006 Governor Mitt Romney signed the health legislation. He vetoed 8 sections of the health care legislation, including the employer assessment. 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. The legislature overrode all of the eight gubernatorial vetoes.

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. 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 (C-CHIP); the employer Fair Share Contribution; and a requirement that each individual must show evidence of coverage on their income tax return or face a substantial fine. 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. 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.

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.
 * 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.
 * 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. The Connector is currently managed by former Tufts Associated Health Plans executive Jon Kingsdale, who serves as its executive director.

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.

Commonwealth Care Health Insurance Program
Commonwealth Care will provide a subsidized private insurance health plan for individuals without health insurance making below 300% of the federal poverty level. No deductibles may be imposed. For individuals below the poverty line, no premiums will be charged. For those above the poverty level, a sliding scale premium schedule based on income is used to determine the amount of money a person contributes to their policy. 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.

Employer Taxes
Employers with more than ten employees must provide a "fair and reasonable contribution" to the premium of health insurance for employees. Employers who do not will be assessed an annual fair share contribution that will not exceed $295 per employee per year. The fair share contribution will be paid into the Commonwealth Care Trust Fund to fund Commonwealth Care and other health reform programs. The Division of Health Care Finance and Policy will define what contribution level meets the "fair and reasonable" test in the statute. There is an additional Free Rider Surcharge that can be assessed to the employer. This surcharge is different from the fair share contribution. The surcharge is applied when an employer does not arrange for health insurance, such as by setting up a payroll deduction system, and has employees who receive care that is paid from the uncompensated care pool. 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. The act also stipulates that the definition of "fair and reasonable contribution" will be determined by the Division of Health Care Finance and Policy. Their regulations state that employers will be considered to be making a "fair and reasonable contribution" if they either contribute more than 33% of the total cost of health care premiums, or if they have over 25% enrollment among eligible, full-time employees.

Individual Taxes
Residents of Massachusetts must have health insurance coverage under Chapter 58. 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. 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 half the cost of the lowest available yearly premium which will be enforced as an assessed addition to the individual's income tax.

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.

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.

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. 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 February 1, 2007, around 45,000 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." 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.

Possible legal challenges
There is a possibility that a legal challenge may arise under the Massachusetts State Constitution, which only allows a flat rate on income to be assessed with reasonable deductions. Since the Chapter 58 bases the amount individuals are required to pay on income, it may be challenged as an unlawfully regressive income tax creating an effective State income tax rate of 15% for those of middle income.

Also, 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). 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. 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. 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.