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Employers Face Uncertainty as Federal Health Reform Meets State Version

Posted on July 26, 2012

What happens when federal health care reform meets state reform? Massachusetts employers are about to find out.

Health ReformThe U.S. Supreme Court decision upholding federal health reform has created uncertainty for Bay State employers as state officials begin to reconcile the national reform law with the 2006 Massachusetts version. At stake are millions of dollars in employer assessments and potentially crushing administrative burdens as employers face the demands of two separate and distinct sets of regulations.

A task force of state regulators, academics and business executives has been convened by the Commonwealth Health Insurance Connector Authority begin the process of ironing out the differences between the state and federal reforms.  AIM President Richard C. Lord and I are participating.

One key issue that employers should monitor is the assessment paid by companies that do not provide health insurance to their workers.

Current Massachusetts law requires employers with 11 or more full-time equivalent employees (FTE) to make a “fair and reasonable” contribution to their employees’ health insurance or pay a Fair Share Contribution (FSC) of up to $295 per employee per year to the state. A fair and reasonable contribution is defined as having at least 25 percent of employees enrolled in the company health plan and/or paying at least 33 percent of the premium for health insurance offered to full-time employees.

The employer contribution requirement of the federal Accountable Care Act (ACA) covers only companies with 50 or more employees. The ACA assesses a fee of $2,000 per full-time employee on employers who do not offer health coverage and have at least one full-time employee who receives a premium tax credit, except that the first 30 employees are excluded from the assessment.

Employers who do offer health coverage but have at least one full-time employee receiving a premium tax credit will pay the lesser of $3,000 for each employee receiving a premium credit or $2,000 for each full-time employee, again excluding the first 30 employees.

Massachusetts, which last year collected $18 million from employers in fair-share contributions, thus faces four choices about how to handle employer assessments. The choices are outlined in a new report by the Blue Cross Blue Shield of Massachusetts Foundation:

  • Eliminate the current fair-share contribution and allow the ACA to become the only employer assess¬ment associated with employer-sponsored insurance in the state. Under this option, employers with 11 to 49 full-time equivalents would no longer face a potential assessment.
  • Maintain the fair-share contribution for employers with 11 to 49 full-time employees but eliminate it for larger employers, who are liable for federal assessments if they do not meet ACA rules.
  • Leave the current fair-share contribution requirement in place while the federal government implements the ACA assessments. This option would mean that employers with 50 or more employees would face assessments by both the state and federal governments.
  • Apply the federal assessment rules to smaller employers, as a means to maintain incentives for small employers to continue offering coverage. Because the ACA assessment rules exempt an employer’s first 30 workers, this state assess¬ment would affect only firms with 31 to 49 employees and not smaller employers.

AIM is leaning toward asking the commonwealth to adopt the federal ACA assessment standard and eliminate the Massachusetts fair-share system. The Blue Cross Blue Shield Foundation concludes that moving to the federal plan would have virtually no effect on net employer spending on health insurance.

What do you think? AIM would like to hear from member employers before we finalize our position. Please drop me an email (  post a comment below.

There are other issues for employers to consider as well:

  • Companies with 50-100 employees that current buy insurance priced according to their own experience may end up in the community-rated “merged market” under federal reform.  The Massachusetts merged market currently includes only companies of up to 50 employees.
  • Starting in 2013, the ACA eliminates, in coordination with Medicare Part D, the tax deduction for employer-provided prescription drug coverage.
  • Also in 2013, the ACA imposes a 2.5 percent tax on the sale of certain medical devices, payable by the device’s manufacturer, producer or importer.

All of these developments come as Massachusetts lawmakers prepare to vote on a landmark bill designed to control soaring health insurance premiums. Action is expected before Wednesday.

So, fasten your seatbelt. We’re in for quite a ride.