Massachusetts employers who breathed a sigh of relief when lawmakers froze 2012 unemployment insurance rates learned today that the commonwealth plans to increase by 33 percent the assessment on business for the fund that provides medical insurance to unemployed people.

The Unemployment Health Insurance Rate Review Board announced this morning that it will raise the employer contribution rate for the Medical Security Trust Fund from $50.40 to $67.20 per employee in an attempt to close a $148 million deficit.  The increase, which comes on top of a 50 percent jump last year, leaves   the Medical Security assessment at twice what it was in 2010 and more than four times the original amount established in 1988.

State officials say the Medical Security Trust Fund, like the overall unemployment insurance system, has been taxed by persistent high unemployment since the 2008-2009 recession and subsequent slow recovery. Enrollment in the Medical Security Trust Fund now stands at 19,644 people after surging to 34,127 in September 2009 and then dropping to 23,700 in November of 2010.

Extended eligibility for unemployment benefits has also put pressure on the fund.  Massachusetts workers who before the recession were allowed to collect benefits for 30 weeks may now collect for more than 90 weeks because of multiple federal extensions passed by Congress.

But the Medical Security Trust Fund would still be in a healthy position despite the weak economy if state lawmakers had not diverted $209 million from the account since 2001 to close budget deficits. State figures show that in November 2001, before money was diverted, there was $150.8 million in the fund, which rises during boom times. In December 2007, just before the recession hit, the balance was $82.4 million.

“Employers would not be saddled with increased assessments if these funds in the Medical Security Trust had remained in place,” said John Regan, Executive Vice President of Government Affairs at Associated Industries of Massachusetts.

“Perhaps the commonwealth should repay the money it diverted from the Medical Security Trust Fund before employers are called upon to foot the bill.”

AIM favors eliminating the Medical Security Trust Fund because it duplicates the services offered under the 2006 Massachusetts Health Care Reform law. The Commonwealth Care program created under health reform allows individuals without access to employer-provided coverage to purchase short-term health insurance through the Commonwealth Connector Authority.

AIM has filed bills in each of the past three legislative sessions to eliminate the Medical Security Trust Fund. The federal economic stimulus law previously limited the degree to which Massachusetts could restructure the Medical Security Trust Fund, but that limitation becomes moot as stimulus dollars run out.

Governor Deval Patrick signed a supplemental budget on February 17 that froze Unemployment Insurance tax rates for 2012 and headed off an automatic 31 percent tax increase for employers. The rate freeze will keep $335 million in the private sector and still leave the Unemployment Insurance Trust Fund with a $400 million at the end of 2012.
Individual employers may still see some increase in their 2012 UI taxes based upon their experience ratings and other factors.

The Patrick Administration says it has made changes to the health insurance provided to jobless people through the Medical Security Trust Fund and predicts that the changes should save approximately $30 million in the next year.