Don't Tamper with the "Fair Share" Assessment by Michael Widmer

Any reevaluation of the employer “fair share” provisions, as suggested by Senator Moore, should consider the specifics of the agreement reached on this issue as part of the health reform legislation. The "fair and reasonable" test to implement the fair share requirement has been widely misinterpreted as setting a minimum standard of employer coverage. That is simply not the case.

Rather, the fair share contribution was specifically tied to equalizing the obligation on employers to pay for free care. Massachusetts employers that provide employee health insurance contribute to the funding of uncompensated care through an annual $160 million insurance surcharge; the very small number of employers that don't provide coverage, don't contribute. The agreement captured in Chapter 58 was to level the playing field by having “non-contributing employers” with 11 or more employees pay for the uncompensated care costs of their uninsured employees. The $295 was the per-employee cost of free care in 2005 for all employees working for employers who made no contribution toward their health coverage. Using this same methodology, the amount of the fair share assessment will be calculated each year, an amount that should decline over time as the use of free care decreases.

The law charged the Division of Health Care Finance and Policy with setting a standard that will differentiate between employers that do contribute to uncompensated care and those that do not – the so-called “fair and reasonable” test. The two-step test established by DHCFP – at least 25 percent employee participation in the employer's plan or a minimum 33 percent employer contribution to the premium – appropriately reflects the intent of the law. The definition was never intended as a standard for what employers should provide; rather, it is a way to determine whether or not an employer is making a contribution to free care.

Those who argue that a 33 percent contribution threshold is too low miss another point.

A new employer contribution to employee health coverage, at almost any level, is preferable to a fair share contribution toward uncompensated care; an employer that wants to start offering employee coverage but can only afford to make a modest contribution shouldn't be discouraged from doing so. A “race to the bottom,” where large numbers of employers that already provide coverage drop their contribution levels to 33 percent, would be a legitimate concern, but with average employer contribution levels now at 75 percent, that's a dire and, at present, unsupportable prediction.

As I pointed out in an earlier entry, the beauty of Massachusetts health care reform law is that it represents a true partnership of shared responsibility among government, employers, and individuals. The fair share contribution is only a small part of the additional employer responsibilities under health reform.

Michael J. Widmer is President of the Massachusetts Taxpayers Foundation