Everyone in Massachusetts Must Have Health Insurance, State to Help Poor

April 5, 2006 – Everyone in Massachusetts must have health insurance under a law passed today, which the governor is expected to sign. The State will also require employers who do not provide employee insurance to pay a fee to help support a new state health insurance program for those of limited financial resources. The bill will also mandate the state help find those eligible for Medicaid and get them enrolled. Many see this is the latest example of states stepping up to the plate on health care solutions as the federal government flounders.

(See bill summary below news report.)

Massachusetts Legislature Approves Bill That Would Require Individuals To Have Health Insurance, Levy Assessment on Employers That Do Not Provide Coverage

Massachusetts lawmakers on Tuesday approved legislation aimed at expanding health coverage for the state's uninsured residents by requiring all residents to buy insurance, the Washington Post reports.

The Senate voted 37-0, and the House voted 154-2 to approve the bill after "two years of politicking and several months of backroom negotiations," according to the Post (Fahrenthold, Washington Post, 4/5).

With the bill, legislators hope to cover 90% to 95% of the state's 500,000 to 600,000 uninsured residents over three years (Helman, Boston Globe, 4/4).

HHS Secretary could use this program as example, as he urges states to be innovative in helping seniors with healthcare

April 3, 2006 - Illinois Governor Rod R. Blagojevich today urged Illinois seniors to join the Illinois Cares Rx program, which is designed to fill in the gaps in coverage of the Medicare Part D prescription drug benefit. It is one of the unique state programs in the U.S. that is helping senior citizens, particularly those of limited means, to afford the medicines they need for survival. HHS Secretary Mike Leavitt, who on Friday urged states to use innovative approaches to provide health insurance and long-term care, may want to point to this program as one good example. Read more...

Read more on Medicare or

Medicare Drug Program or Medicaid

The legislation calls for uninsured residents by July 1, 2007, to purchase new, low-cost health insurance plans or forfeit their personal state tax exemption -- worth about $150 -- in the first year.

Individuals who do not buy plans in the second year would have to pay a fine equal to half of the monthly premium of an affordable plan, which could amount to $1,200 annually (Hechinger/Armstrong, Wall Street Journal, 4/5).

The bill would require all residents to provide details about their health insurance policies on their state income tax returns in 2008, and those who cannot find an affordable plan could obtain a waiver, the Post reports. According to state officials, hospitals will continue to treat uninsured patients and will not enforce the coverage requirement (Washington Post, 4/5).

New Coverage Options
Uninsured residents with incomes up to 300% of the federal poverty level -- $28,700 for a single person -- would be eligible for Commonwealth Care, a new state-subsidized program (Ring, Springfield Republican, 4/4).

Through the program, uninsured residents with incomes lower than 100% of the federal poverty level would be able to purchase subsidized policies without premiums. The policies would require "very small" copayments for emergency department visits and other care, according to the Post. Residents with annual incomes between 100% and 300% of the federal poverty level would be able to purchase subsidized policies that have premiums on a sliding scale.

The legislation does not specify how much low-income residents will pay for the new, low-cost policies. A new state agency that will "serve as a liaison between the government, policyholders and private insurers" in part will determine that amount, the Post reports (Washington Post, 4/5). Legislators hope to cover an additional 207,500 residents through the low-cost plans (Boston Globe, 4/4).

In addition, the plan would provide incentives for insurers to offer low-cost plans with limited benefits to people ages 19 to 26 (Belluck, New York Times, 4/5). The legislation also aims to provide coverage for 92,500 uninsured residents under MassHealth, the state's Medicaid program, by expanding eligibility requirements for children and enrolling more eligible adults who have not yet signed up, according to the Globe (Boston Globe, 4/4).

Other Provisions
The legislation also would require employers with 11 or more workers to provide health care coverage or pay an annual fee of $295 per employee. In addition, the measure would require employers whose uninsured workers repeatedly use EDs to pay between 10% and 100% of the portion of medical bills exceeding $50,000, the Wall Street Journal reports (Wall Street Journal, 4/5). Legislators said the employer fees would go toward the fund that would subsidize low-cost policies, the Post reports (Washington Post, 4/5). The fees are designed to raise about $45 million per year (Boston Globe, 4/4). The plan would also allow individuals and businesses with 50 or fewer employees to purchase insurance with pretax dollars (New York Times, 4/5).

Pay-for-Performance
The bill outlines hundreds of millions of dollars in Medicaid payments under a pay-for-performance system in which health care providers must show they are meeting certain quality standards in order to receive the additional dollars. In addition, hospitals and doctors must show they are reducing racial and ethnic disparities and health care delivery and outcomes.

The quality requirements go into effect in July 2007, and hospitals and doctors will receive an additional $90 million in fiscal year 2007, $180 million in FY 2008 and $270 million in FY 2009. The Executive Office of Health and Human Services and two advisory groups will specify the performance measures, cost control criteria and the amount of Medicaid payments at risk over the next year, the Globe reports (Kowalczyk, Boston Globe, 4/5).

Funding
According to the Journal, the bill, which is estimated to cost more than $1 billion annually, would be funded through $125 million in new state spending, money from existing programs and fees from businesses, and individuals who do not meet the measure's requirements (Wall Street Journal, 4/5).

The cost also would be funded through $650 million a year in federal Medicaid payments (Springfield Republican, 4/4). However the "question remains ... whether the state has moved quickly enough to satisfy federal officials who had threatened to end $385 million in annual federal Medicaid funding," the Globe reports. The state "needed to demonstrate substantial progress in reducing the number of uninsured to continue getting the money, and federal officials had urged the state to have a plan in place by January," according to the Globe (Boston Globe, 4/4).

Comments From Governor, Lawmakers
Gov. Mitt Romney (R), who is expected to sign the bill, said the bill is "95% of what I proposed." He continued "This is really a landmark for our state because this proves at this stage that we can get health insurance for all our citizens without raising taxes and without a government takeover. The old singer-payer canard is gone" (New York Times, 4/5).

He added that he likely would "adjus[t]" the employer-fee provision through use of a line-item veto (Washington Post, 4/4). However, the New York Times reports that Romney "did not seem that worried about it, saying he had been most concerned that the fee not be a payroll tax, as had been originally proposed."

Senate President Robert Travaglini (D) said that if Romney vetoes the fee, the Legislature would override it (New York Times, 4/5).

House Speaker Salvatore DiMasi (D) said, "This is a very historic moment in Massachusetts. We will be able to in three years, hopefully virtually insure every man, woman and child in this commonwealth."

U.S. Sen. Edward Kennedy (D-Mass.) said, "I think a lot of people in the health community understood that this was a special moment, and we shouldn't lose it or miss it. I found that at the end of the day, when it really counted, (legislative leaders) were inspired to do the right thing" (Boston Globe, 4/4).

Additional Reaction
Bob Baker, president of the Smaller Business Association of New England, said the association's members seemed to accept the employer-fee provision, adding, "The notion of the level playing field, I think from an element of fairness and equity, people are OK with it, unless it impinges on their ability to pay for it. There hasn't been a hue and cry among our members."

James Roosevelt, president and CEO of Tufts Health Plan, said, "I think that [insuring more people] will help both improve the quality of health care and lower the cost," adding, "We would have liked more flexibility in the design of health plans to permit lower premiums that are affordable for all people" (New York Times, 4/5).

Paul Ginsburg, an economist with the Center for Studying Health System Change, said by requiring individuals who can afford to purchase insurance to do so, "[t]hat is where they are really pioneers" (Appleby, USA Today, 4/5).

Related Coverage

The Globe on Wednesday examined how "[l]obbyists for hospitals, insurance companies and other major players in the health care industry were paid at least $7.5 million in 2005" during the negotiations over the health care reform bill. Major spenders included pharmaceutical companies, business associations, hospitals and health plans. The "amount spent on health care lobbying in 2005 is up more than a third over 2004 and far outstrips what was spent" by the gambling and casino industry during debate over slot machines, the Globe reports (Helman, Boston Globe, 4/5).

USA Today on Wednesday looked at examples of how "a growing number of states are thinking big" and "expanding health care coverage" while "Washington continues to debate relatively minor changes to the health system." While Massachusetts lawmakers on Tuesday passed legislation requiring residents to purchase health insurance, Oregon, New Mexico, California and Arizona are considering proposals to create universal health care coverage. In addition, Maryland recently passed a law that requires some large employers to provide health coverage to employees, while Kansas, Maine, Minnesota and others are "creating ways to help small businesses buy insurance," USA Today reports (Appleby, USA Today, 4/5).

Broadcast Coverage
NPR's "Morning Edition" on Wednesday reported on the bill. The segment includes comments from Herman Hamilton, a Presbyterian minister active in the campaign for the bill; John McDonough, executive director of HealthCare for All; Alan Weil, executive director and president of the National Academy for State Health Policy; and Michael Widmer, president of the Massachusetts Taxpayers Foundation (Knox, "Morning Edition," NPR, 4/5). The complete segment is available online in RealPlayer.

In addition, NPR's "All Things Considered" on Tuesday reported on the bill (Knox, "All Things Considered," NPR, 4/4). The complete segment is available online in RealPlayer. Expanded NPR coverage of the bill is available online.

In related news, Al Hubbard, director of the National Economic Council, is scheduled to answer questions about affordable health care and health savings accounts on Wednesday at 4 p.m. in an "Ask the White House" chat. A transcript of the chat will be available online.

"Reprinted with permission from kaisernetwork.org You can view the entire Kaiser Daily Health Policy Report, search the archives, and sign up for email delivery at www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation. © 2006 Advisory Board Company and Kaiser Family Foundation. All rights reserved.”

Below is a summary of the legislation.

Health Care Access and Affordability

Summary:

This Conference Committee Report contains a comprehensive plan for increasing health insurance coverage for all residents of Massachusetts. This bill is a bridge between principles in the House and Senate bills, H 4479 and S 2282. The bill would redeploy current public funds to more effectively cover currently uninsured low-income populations, and would make quality health coverage more affordable for all residents of the Commonwealth. The bill promotes individual responsibility by creating a requirement that everyone who can afford health insurance obtain it, while also responding to concerns about barriers to health care access. Provisions in the bill aim at achieving nearly universal health insurance coverage, but also maintain a strong safety net that has historically distinguished the state. Finally, the bill would ensure that the Massachusetts Medicaid program complies with the terms of the new federal waiver, maintaining continued receipt of annual payments from the federal Medicaid program.

A) Commonwealth Health Insurance Connector

The bill creates the Commonwealth Health Insurance Connector, to connect individuals and small businesses with health insurance products. The Connector certifies and offers products of high value and good quality. Individuals who are employed are able to purchase insurance using pre-tax dollars. The Connector allows for portability of insurance as individuals move from job to job, and permits more than one employer to contribute to an employee’s health insurance premium. The Connector is to be operated as an authority under the Department of Administration and Finance and overseen by a separate, appointed Board of private and public representatives.

B) Insurance Market Reforms

The bill merges the non- and small-group markets in July 2007, a provision that will produce an estimated drop of 24% in non-group premium costs. An actuarial study of the merging of the two insurance markets will be completed before the merger to assist insurers in planning for the transition. The bill also enables HMOs to offer coverage plans that are linked to Health Savings Accounts, reducing costs for those who enroll in such plans. Young adults will be able to stay on their parents’ insurance plans for two years past the loss of their dependent status, or until they turn 25 (whichever occurs first), and 19-26 year-olds will be eligible for lower-cost, specially designed products offered through the Connector.

Finally, the bill would impose a moratorium on the creation of new health insurance mandated benefits through 2008.

C) Subsidized Health Insurance

Commonwealth Care Health Insurance

The bill creates a subsidized insurance program called the Commonwealth Care Health Insurance Program. Individuals who earn less than 300% FPL and are ineligible for MassHealth will qualify for coverage. Premiums for the program will be set on a sliding scale based on household income, and no plans offered through this program will have deductibles. The program will be operated through the Connector, and retain any employer contribution to an employee’s health insurance premium. The subsidized products must be certified by the Connector as being of high value and good quality.

For individuals who earn less than 100% of the Federal Poverty Level ($9,600/yr), special protections in this bill provide for subsidized insurance products with comprehensive benefits, and waive any premiums. Currently, most childless adults are not eligible for MassHealth at any income level, unless they are disabled or have very little history of employment.

Insurance Partnership Program

The bill expands eligibility for employee participation in the current Insurance Partnership program from 200% to 300% FPL, in order to provide another option for small businesses who want to offer health care to their employees.

D) The Medicaid Waiver

By shifting significant federal resources from supporting individual hospitals to funding health insurance coverage for uninsured individuals, and by living within a lifetime spending ceiling for waiver services, the bill meets the terms set by the Centers for Medicare and Medicaid for renewal of our 1115(a) MassHealth Demonstration Waiver.

E) Medicaid Expansions, Restorations, Enhancements

The bill expands Medicaid coverage of the uninsured by providing $3M for comprehensive community-based outreach programs to reach people who are eligible for Medicaid but not yet enrolled, and by expanding eligibility for children. Currently, children in families who earn up to 200% of the Federal Poverty Level (FPL) are eligible for MassHealth. The bill increases eligibility to children in families earning up to 300% FPL ($38,500/yr for a family of 2).

Conference Committee Report 2 4/3/2006

The bill also restores all MassHealth benefits that were cut in 2002, including dental and vision services, and creates a 2-year pilot program for smoking cessation treatment for MassHealth enrollees.

In response to concern that Medicaid has underpaid many of its providers in recent years, the bill includes $90 million in rate relief for Fiscal Years 2007, 2008 and 2009. It does this while keeping within the budget neutrality limits of federal financing under the Medicaid waiver. The bill also establishes, for the first time, a process of tying rate increases to specific performance goals related to quality, efficiency, the reduction of racial and ethnic disparities, and improved outcomes for patients.

F) Individual Responsibility for Health Care

The bill requires that, as of July 1, 2007, all residents of the Commonwealth must obtain health insurance coverage. Individuals for whom there are not affordable products available will not be penalized for not having insurance coverage. A sliding “affordability scale” will be set annually by the Board of the Connector.

The purpose of this “Individual Mandate” is to strengthen and stabilize the functioning of health insurance risk pools by making sure they include healthy people (who, if not offered employer-sponsored and -paid insurance, are more likely to take the risk of not having insurance) as well as people who know they need regular health care services (and therefore are more likely to go to great lengths, and expense, to obtain insurance.) The financing of the bill is based on redirecting some of the public funds we currently spend on “free care” provided through hospitals, to provide subsidized health insurance to the uninsured. The mandate is another way to make sure people do not rely on “free care” for their health care, but that they get comprehensive insurance.

Beginning in July 2007, Massachusetts residents will be required to have health insurance. Residents will confirm that they have health insurance coverage on their state income tax forms filed in 2008. Coverage will be verified through a database of insurance coverage for all individuals. The Department of Revenue will enforce this provision with financial penalties beginning with a loss of the personal exemption for tax year 2007 and then increasing to a portion of what an individual would have paid toward an affordable premium for subsequent years.

G) Employer Responsibility for Health Care

Fair Share Contribution

The bill creates a “Fair Share Contribution” that will be paid by employers who do not provide health insurance for their employees and make a fair and reasonable contribution to its cost. The contribution, estimated to be approximately $295 per

full time employee (FTE) per year, will be calculated to reflect a portion of the cost paid by the state for free care used by workers whose employers do not provide insurance. Currently, a portion of the payments made by employers who do provide health coverage go towards free care costs, and this new contribution will help level the playing field. The Fair Share Contribution requirement will only apply to employers with 11 or more employees who do not provide health insurance or contribute to it, as defined by the Division of Health Care Finance and Policy, and will be pro-rated for employers with seasonal or part-time employees.

Free Rider Surcharge

The Free Rider surcharge will be imposed on employers who do not provide health insurance and whose employees use free care. Imposition of the surcharge will be triggered when an employee receives free care more than three times, or a company has five or more instances of employees receiving free care in a year. The surcharge will range from 10% to 100% of the state’s costs of services provided to the employees, with the first $50,000 per employer exempted. Revenue gained from the surcharge will be deposited in the Commonwealth Care Trust Fund.

Mandatory Offer of Section 125 plans

Section 125 plans or “cafeteria plans” allow an employer to offer health insurance and other programs such as day care funding to employees on a pre-tax basis. Because of the significant savings which result from pre-tax insurance purchase, employers with more than 10 employees will be required to offer this pre-tax benefit to employees.

H) Reduction of Racial and Ethnic Health Disparities

The bill aims to reduce racial and ethnic health disparities by requiring hospitals to collect and report on health care data related to race, ethnicity and language. Medicaid rate increases in the bill are made contingent upon providers meeting performance benchmarks, including in the area of reducing racial and ethnic disparities. The bill creates a study of a sustainable Community Health Outreach Worker Program to target vulnerable populations in an effort to eliminate health disparities and remove linguistic barriers to health access. Finally, the bill creates a Health Disparities Council, to continue the work of the Special Commission on Racial and Ethic Health Disparities by recommending appropriate Legislative steps to reduce health disparities.

H) Health Safety Net Office and Fund

Many recommendations of the Inspector General’s Office regarding the management of the Uncompensated Care Pool are included in the bill. Effective

October 1, 2007, the current Uncompensated Care Pool is eliminated, replaced by the Health Safety Net Fund. The Fund will be administered by a newly-created Health Safety Net Office located within the Office of Medicaid. The HSN Office will develop a new standard fee schedule for hospital reimbursements, replacing the current charges-based payment system. The plan anticipates the transfer of funds to the Commonwealth Care Health Insurance Program as free care use declines.

I) Funding

The plan leverages federal dollars to enhance and match state spending, and uses revenue generated by employer contributions to fund health insurance coverage.

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