Mass. to Impose Individual Mandate, Employer Fee to Expand Health Cover

The Massachusetts House and Senate have passed a landmark plan designed to expand health insurance to most of the state’s estimated 500,000 uninsured citizens.

The measure requires that all residents and most employers participate in the health insurance system. It also contains strategies to make coverage more available and affordable for those now uninsured.

The plan requires that starting July 1, 2007, all adult residents of the state must obtain health insurance. This will be confirmed on state tax returns. Those who do not obtain coverage will lose their personal exemption for that tax year. Additional penalties could approach the premium an individual would pay for coverage.

The plan also requires what is being called a “fair share contribution” from employers with 11 or more employees who do not provide health insurance for their employees or do not make a “fair and reasonable” contribution to its costs. The “fair share” fee, estimated to be $295 per full time employee per year, will be calculated to reflect a portion of the cost paid by the state for free care used by workers whose employers do not provide coverage. It will be pro-rated for employers with part time or seasonal workers.

After months of negotiation, the final measure won overwhelming support. It passed the Senate, 37-0, and the House, 154-2. It will now go to Gov. Mitt Romney, who has voiced general support.

“Everyone pays their part: individuals, government, health care providers and employers,” proclaims the document outlining the plan.

Currently, employers who do pay group premiums are paying a built-in surcharge to cover the free care costs for residents without coverage. One aim of the new program is to bring all employers into the system.

The purpose of the individual mandate is to strengthen the health insurance system by making sure it includes healthy people, who might not otherwise buy coverage, as well as people who know they need regular health care services, explains the outline for the bill.

A central component of the plan is the creation of Commonwealth Health Insurance Connector, which is intended to make it easier for small businesses and individuals without coverage to find affordable policies. This entity would make available the same comprehensive policies, with no deductibles, that are now available from private insurers in the marketplace. But the Connection would, in some cases, subsidize the premiums.

A person or family buying through the Connector could qualify to pay a lower premium based on a sliding income scale. Insurance will be free for individuals making less than $9,500 a year. Families with incomes up to about $48,000 for a family of three, which is 300 percent of the federal poverty level, will also have access to coverage with no deductibles with their premium subsidized in part.

Those with jobs will be able to purchase coverage with pre-tax dollars; they will be able to keep their insurance if they changed jobs.

Also, part-time employees working two jobs can have the combined contributions of both employers put towards their insurance premium.

Research done for the lawmakers working on the bill indicates the uninsured tend to be low income, part time and seasonal workers, single and childless adults, and young adults just starting out.

The program includes additional strategies for increasing the availability of insurance. It allows existing high deductible policies to be tied to health savings accounts and gives HSAs favorable tax treatment.

Family plans will have to allow young adults to stay on the policy for two years past loss of dependency, or until age 25, whichever occurs first.

Health plans will be encouraged to develop new products for the 19 to 26 year old market and offer them through the Connector.

The legislation also calls for the eventual merger, following a study, of the group and non-group markets, which supporters estimate could reduce premiums for individuals by 25 percent.

Its drafters estimate the program will cost $300 million in the first year and acknowledge that those costs will rise, perhaps to $1 billion by the third year. They are counting on federal monies owed the state and payments for health insurance the state already makes to pay for it. While it does call for the $295 employer fee, the plan does not impose new taxes.

Senate President Robert Travaglini and House Speaker Salvatore DiMasi unveiled the agreement at a Boston news conference. They said the program should cover 90-95 percent of the state’s estimated 500,000 uninsured in the next three years. They also said it should cut health care costs for employers.

Gov. Mitt Romney, a Republican who has shown interest in running for president, has expressed support. Romney had raised questions about imposing an employer surcharge or tax but said he could support a fee. The legislation does give him the power to veto provisions he doesn’t like, however.

Topics Legislation Commercial Lines Business Insurance Massachusetts