New Employer Responsibilities Coming Soon! by Richard C. Lord

One of the key components of health care reform, the individual mandate, is just around the corner. On July 1st, Massachusetts will be the first state in the nation to require its residents to obtain health insurance coverage. The entire country is watching this bold experiment in the hope that our ambitious plan can serve as a model for other states in expanding access to the uninsured.

In addition to the individual mandate, there are a number of other provisions in the new law which employers are gearing up for as well.

The most significant is the requirement that all employers with 11 or more full-time equivalent employees offer their workers the opportunity to purchase health insurance with pre-tax dollars by establishing a Section 125 plan. This plan must be available to employees regardless of whether they are eligible for employer sponsored health insurance. A Section 125 plan (named after a section of the Internal Revenue Service code) can reduce the out-of-pocket cost to employees by as much as 40% since the pretax withholding is not subject to federal, state or Social Security taxes. It also will provide savings for employers because they will not be subject to Social Security taxes on the employee contributions. The penalty to an employer who fails to establish a Section 125 plan can be fairly severe. Under the law, employers whose workers utilize emergency room services and who were not offered a Section 125 plan will be subject to a "free rider" surcharge, i.e. they will be billed for a portion of the cost of those emergency room services. Employers should be consulting with their brokers, insurance agents, or trade associations (like A.I.M.) if they have questions about this new requirement.

There are also changes to the Massachusetts insurance laws that may impact employers. Effective July 1, 2007, Massachusetts health insurance carriers are prohibited from selling a plan to an employer unless that plan will be offered to all full-time employees, defined as those averaging 35 or more hours per week. Additionally, a plan cannot be sold to an employer that pays a higher percentage of the premium for higher paid employees than for lower paid. There are some exceptions allowed such as higher contribution levels based on longevity, different contributions for full-time vs. part-time employees, and several others. Again, employers should contact their insurance companies or brokers to ensure that they understand and are in compliance with the new law.

There are other employer responsibilities that will be kicking in during the months ahead. Those employers who do not make a "fair and reasonable" contribution to their employees' health insurance will be subject to a new "fair share" assessment of up to $295 per year per employee. And employers and employees will need to complete "Health Insurance Responsibility Disclosure (HIRD)" forms, although the details of this new reporting requirement are still being determined by the state.

A.I.M. has been very active in educating employers throughout Massachusetts during the past several months about their responsibilities with a series of briefings and workshops, with additional workshops scheduled in Boston, Leominster, Burlington and Taunton during the first few weeks of June. We have found that employers are eager to comply with the new law but are anxious that there are several details still undetermined (like the HIRD forms mentioned above) and administrative procedures that have not been finalized. We will be continue to work diligently in the coming months to provide input to the state agencies charged with writing the regulations and to educate and inform our 7,500 members as decisions are made and information becomes available. We look forward to continuing to play a very important role in outreach to the employer community in this exciting endeavor.

Richard C. Lord,
President and CEO
Associated Industries of Massachusetts