Under the Massachusetts Health Care Reform Act, employers with 11 or more full-time equivalent employees in Massachusetts must make a "fair and reasonable" contribution toward the cost of their full-time employees' health insurance. Employers that fail to do so, or which do not offer any employer-sponsored health insurance, will be required to pay an annual fee of up to $295 per full-time employee. The fee, known as the “Fair Share Contribution,” will be pro-rated for part-time and seasonal employees.
This Fair Share Contribution is used to help fund state-subsidized health plans that are available to low-income people who do not have access to employer-sponsored health insurance, and to provide rate increases to certain Medicaid providers. Its purpose is to help equalize the burden of expanding health care access among all employers.
When the Health Care Reform law was being negotiated in the legislative Conference Committee, legislators did discuss whether it was necessary to set minimum levels of contributions by business. However, legislators were told that the major health insurance plans did not write insurance for groups that did not have at least fifty percent of employees in the program and for which the employer contributed at least fifty percent of the premium cost. The average employer share at that time was 75%. Therefore, the actual provisions for implementing the “Fair Share Contribution” were left to the executive branch of government.
When the Romney Administration was developing its standards, numerous healthcare advocates, unions, and other organizations criticized the proposals and asked the Division of Health Care Finance and Policy to increase the minimum company contribution to 50 percent of an insurance premium to avoid the assessment. At the time, Representative Patricia Walrath and I, as co-chairs of the health care conference committee, wrote to the Administration to underscore that the legislative intent was not to go below the levels of employer-based insurance then in effect. However, leaders of business and taxpayer groups endorsed Romney's proposed regulations setting a very low standard.
In designing “business friendly” regulations, the Romney Administration established two different ways for employers to meet the "fair and reasonable" contribution test:
• Primary Test: During the period October 1 to September 30, at least 25% of the employer's full-time employees in Massachusetts participate in the employer's group health plan that the employer pays for in whole or in part.
• Secondary Test: The employer offers to contribute at least 33% of the premium cost of any group health plan it offers to its full-time employees in Massachusetts who are employed more than 60 days during the period from October 1 to September 30.
If an employer passes either test, it does not have to pay the Fair Share Contribution. However, employers may not offer different plans to different classes of employees.
Recently, Blue Cross/Blue Shield decided to decrease its employer contribution requirements from a 50% contribution to one-third. This is a problem that Representative Patricia Walrath and I anticipated because of the regulations that the Division of Health Care Finance and Policy drafted and implemented under the Romney Administration. Last August, we wrote to the Romney Administration objecting to the proposed standards.
While the Blue Cross action raises concern because of their significant market share, the greater problem is that the other carriers will, most likely, soon follow suit. The result is that more businesses may pass on a greater share of the cost of health insurance to their employees and still avoid the “Fair Share Contribution.” In my opinion, such businesses will no be carrying their “fair share” of the cost of covering the uninsured because they will be forcing workers into situations where health insurance costs are unaffordable. Such a circumstance would increase the number of individuals eligible for waivers, thereby increasing the demand for the Safety Net Care Pool, and defeating a major benefit of the reform law. The Patrick Administration has the power to correct this potential problem by regulatory action. It could also be addressed by the Legislature.
The “fair share contribution” is, I believe, emerging as a substantive issue with the implementation of health reform. The $295 fee was an amount proposed by the Massachusetts Taxpayers Foundation as an alternative to a payroll tax proposed in the House version of the legislation. MTF told us that their analysis of Uncompensated Care Pool usage in 2005 (the year prior to enactment of health care reform) demonstrated that working individuals paid an average of $295.
Although Chapter 58 of the Acts of 2006 (the Health Reform Law) caps the “fair share contribution” at $295, the Legislature has the power to change the amount as well as its method of calculation. We might, for example, prefer to conduct an analysis of the use of the pool by working individuals over the three years prior to enactment of reform instead of just one year. Another option is to use a formula such as the one in Vermont. In setting their “fair share” figure, they chose the amount $365, or a dollar a day. Clearly, the amount of the “fair share contribution” and the standards determining which businesses should contribute are issues that deserve further review.
Senator Richard T. Moore co-chairs the Joint Committee on Health Care Financing
This program aired on July 2, 2007. The audio for this program is not available.