The Massachusetts Health Connector announced Monday that it plans to file legislation to repeal several key requirements of the state health reform law, including the Section 125 requirement, the Employer Health Insurance Responsibility Disclosure (Employer HIRD) requirement, the free-rider surcharge, and the recently created Section 125 notification requirement.

The announcement comes as welcome news to Massachusetts employers.

The 2006 Massachusetts health reform required employers with 11 or more workers to offer all employees who work 64 hours or more per month the opportunity to pay for health insurance on a pre-tax basis through the employer’s section 125 plan.  Employees could use the plan to purchase insurance through the employer, if eligible, the Massachusetts Health Connector or a private third party.  Now, effective the last day of current plans in 2014, the federal Affordable Care Act eliminates the use of section 125 plans for the purchase of health insurance through a public health exchange such as the Massachusetts Health Connector.

Despite the new restrictions, Massachusetts has maintained its section 125 requirement so that employees who do not meet their employer’s health care eligibility requirements may still purchase health insurance privately through a third party and save money through pre-tax payroll deductions.  Those employees just are not be able to use the section 125 deductions for plans purchased through the Connector.

Massachusetts employers raised concerns about this process during recent forums with the Health Connector, the Division of Insurance and AIM.  Collecting payroll deductions and forwarding the funds to a private insurance company seems a significant burden to employers, while benefitting few employees.

AIM applauds the Health Connector for listening to employers and addressing their concerns. The association also urges members of the Massachusetts Legislature to approve the Connector’s plan to eliminate the section 125 requirements.

In the meantime, some advice for employers:

• If you currently have employees using your section 125 plan to pay for plans through the Connector, they may continue to do so until the plan year ends in 2014.
• You need not make your section 125 plan available to employees who are not eligible to participate in the company’s health insurance.
• You may continue to use the existing Notice of Health Care Exchanges for new hires.