Small Businesses Wary of Mass. Health Coverage Requirements

Gibson Engineering says the health care coverage it offers its 35 workers is generous — its plan features high deductibles, but includes a unique self-insurance provision to limit employees’ out-of-pocket expenses.

“Our employees like our plan very much, and it has allowed Gibson to control our costs in a very effective manner,” said Casey Tincler, the Norwood-based firm’s comptroller.

But the company worries its plan’s $3,000 annual deductible will be too high to comply with emerging state mandates that regulators are writing one year after Massachusetts’ landmark health care program was signed into law– an anniversary that passes Thursday.

Gibson is one of many small businesses statewide trying to figure out how its current health plans will mesh with expanded state requirements needed to meet the state law’s goal of insuring nearly all of Massachusetts’ uninsured residents.

One rule would exclude plans with deductibles greater than $2,000 from meeting a minimum coverage standard that the state defines as the most basic health insurance it will recognize under the law.

Gibson Engineering’s employees are responsible for the first $500 in individual medical claims per year, not including co-payments. Once claims exceed $3,000, Blue Cross Blue Shield coverage kicks in, under a Blue plan that Gibson buys. Between $500 and $3,000, Gibson covers costs through its own self-insurance.

“Without consideration of the self-insurance strategy we employ, our very good plan will be disqualified,” said Tincler, whose firm has been selling industrial automation products to clients across New England since 1945.

Most of the state’s roughly 200,000 businesses either already meet the standards that regulators are drawing up, or don’t face minimum coverage requirements because they have 10 or fewer full-time employees.

But for many businesses, the law will require tough choices about whether to make costly upgrades to improve their health plans starting in January 2009, or face a $295 per-worker annual assessment if their coverage falls short of the state’s standard.

No one is sure yet how many businesses’ health plans will fall short. Most are believed to be small companies facing a comparatively bigger financial burden than larger companies that can more easily spread health care costs among their employees, said Bill Vernon, Massachusetts director of the National Federation of Independent Business, a small business lobbying group.

Small businesses also face a high burden because prices for the small group insurance coverage they typically buy have recently risen far faster than costs for bigger companies, said Jon Hurst, president of the Retailers Association of Massachusetts.

“We are going to continue to press for more fairness for small businesses,” Hurst said.

John McDonough, executive director of Health Care for All, said some businesses are trying to water down requirements now that they’re beginning to learn details about the obligations they must meet under a law that also requires all state residents to obtain insurance or face tax penalties.

“If you try and create a balanced approach, you get people from the business side saying you’re setting the coverage floor too high,” said McDonough, whose coalition represents groups including labor unions that seek expanded coverage requirements. “But then you have lots of other folks who care about adequate coverage saying you’ve set it too low.”

Some obligations businesses face are being delayed, in part because of their objections that the state was moving too quickly for them to adopt the more stringent requirements.

On March 20, the board that oversees the state’s law voted to delay key elements by a year and a half. If the slower timeline wins final approval in June, it won’t be until January 2009 that employers must meet the state’s minimum coverage requirement or face the $295-per-employee annual assessment. A requirement that everyone be covered for prescription drugs– a move that many businesses say will unfairly drive up their expenses– also is being pushed back until January 2009.

To avoid paying the $295, businesses can contribute 33 percent of the cost of an individual employee’s health care premium. As an alternative, employers could avoid the fee if at least one-quarter of their full-time employees choose to enroll in the company’s group health plan, regardless of how much coverage is included.

Despite the delays, businesses still face obligations before 2009. On July 1, employers with 10 or more employees must offer a state-licensed health plan — a broad definition that includes coverage that wouldn’t qualify for the tougher state mandate taking effect in 2009.

Businesses not offering such state-licensed plans will have to cover a portion of uninsured costs when their employees need medical care _ a requirement intended to end the free ride such businesses have enjoyed when the state reimburses hospitals for treating the uninsured.

Meanwhile, a vote on what requirements to include in the state’s minimum coverage standard is expected June 14, following public hearings next month. Changes could be made to some of the requirements, like the high-deductible limit that could disqualify Gibson Engineering’s plan from meeting the state’s standard.

“It’s a work in progress,” said Hurst, of the state retailers’ group. “We can’t really say yet whether this law is going to be good or bad for small business at this point.”

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On the Net:

Commonwealth Health Care Insurance Connector Authority:

http://www.mass.gov/?pageID=hichomepage&L=1&L0=Home&sid=Qhic