"New Proposal Unhealty for Employers" By Richard C. Lord

Last week Governor Patrick filed a supplemental budget request with the Legislature to generate $130 million in new revenue during FY 09 to fill an alleged shortfall in funding for health care reform. Not only is this request for new money premature – a shortfall is by no means certain - but it also falls dispro-portionately on the backs of employers in Massachusetts at a time when they are reeling from record energy prices, a sluggish economy and a $500 million increase in taxes approved earlier this month. So much for the “shared responsibility” theme that was a hallmark of the original law in 2006!

The state’s FY 09 budget includes $869 million for the Commonwealth Care program, a key component of health care reform providing subsidized insurance for low-income residents. This level of funding would support 225,000 enrollees. Currently Commonwealth Care serves 174,000 Massachusetts residents, an enrollment level that has been virtually flat since February when the state began reviewing eligibility for individuals who had been on the program for at least a year. There is no evidence that enrollment is going to increase dramatically and create a funding gap by the end of this fiscal year. So there is no need to impose new financial burdens on beleaguered Massachusetts companies.

Look at the details of the recommendation from the Administration, and you realize that almost all of the new costs will be borne by the business community.

There are new assessments on insurers ($33 million) and hospitals ($20 million) which, unless those groups are now printing money in their basements, will be passed along to employers and their workers in the form of higher health insurance premiums. There is a transfer of $35 million of surplus revenues from the state’s Medical Security Trust Fund, which pays for health insurance for the unemployed. Continuing the myth of shared responsibility, the Administration claims that this is the government’s contribution to the funding shortfall. The reality is that the Medical Security Trust is funded completely by employers in the form of a $16.80 per employee assessment tacked onto their unemployment insurance (UI) tax bills each year. Those UI tax bills are already the second highest in the country.

One of the most troubling recommendations is the proposed change to the method by which the state will determine if an employer makes a “fair and reasonable” contribution to employee health insurance or must pay the annual $295 per employee “fair share” assessment. Currently an employer must demonstrate that 25 percent of its full-time workers are enrolled in the company’s health insurance plan OR that it pays 33 percent of the premium within the first 90 days of hire. The Administration wants to require employers to pass both tests, raising an estimated $33 million. This new burden will fall heavily on employers, such as retailers, who typically have waiting periods in excess of 90 days - which makes perfect sense given the high rates of employee turnover in that industry. We are thus going to penalize certain categories of employers who legitimately have lengthy waiting periods, but otherwise provide generous health care benefits.

One of the reasons that health care reform has been so successful to date has been the strong support of the state’s business community. I am disappointed that this support has been rewarded by increasing the burdens on employers who themselves are struggling with double-digit premium rate increases and other cost pressures, such as exorbitant energy prices, which are hurting their competiveness. This ill-conceived and poorly timed plan needs to be reconsidered.

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