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February 1, 2007

Unfinished business: State health plan worries small employers

By Christina Oneill

As the Commonwealth Health Insurance Connector sent insurers back to the drawing board last month to rebid their proposed "affordable" insurance plans, small businesses were left with more questions than answers. The state’s plan to insure all Massachusetts residents is moving steadily toward a July 1 implementation deadline, but late last month, the state and the providers seemed to be far apart on what constitutes affordable - and sufficient - health care coverage.

State Sen. Harriette Chandler, speaking at a January 24 informational breakfast sponsored by the Wachusett Chamber of Commerce, said of the initial proposal for a $380 monthly premium for individuals in the $30,000 income range, "Nobody’s going to be able to afford that." While the Connector is supposed to certify products of high value, designed to reduce small business’ administrative burden, "That has proven a little elusive at the moment."

As we went to press, the Connector had delayed decisions on approving plans as it waited for products to be rebid. A January 30 report in The Boston Globe described the new standards as "in flux." The state’s insurers said that more than 200,000 Bay State residents who already have health insurance would have to buy additional coverage to meet the state’s proposed minimum standards.

Give it time

But John McDonough, executive director of Boston-based Health Care for All, says it’s too early in the process to make declarations about success or failure. Important policy information is still coming forward, he says. "My advice to everybody is to take a chill pill," he says. "We’re moving forward." He notes that 100,000 people who were uninsured before the law was signed now have health insurance.

Matt Hollister, president of Hollister Insurance Brokerage Inc. in Clinton, advises of the advantages and restrictions of the new state law.
His views on priorities and premature predictions of outcomes are shared by Richard Lord, president of Associated Industries of Massachusetts, a trade organization representing 7,600 Mass.-based businesses. He’s also a member of the Connector board. The $380 premium figure, he says, was an average of the lowest and the highest bids submitted to the Connector, and it "has taken on a life of its own." He says he doesn’t think people with insurance deemed inadequate by the state should have to spend even more. Instead, he says, the state should focus on those who don’t have any insurance. "We should start the bar at the lower end," he says. However, he adds, it’s too soon to think about increasing waivers for those making more than 300 percent of the federal poverty level, as has been suggested by the Greater Boston Interfaith Organization in a recent proposal.

Benefits broker Matt Hollister, president of Hollister Insurance Brokerage Inc. in Clinton, says the $380 per month premium is what he’d expect an insurer to quote for the average cost of first-dollar coverage on a $15 copay. Instead, as submitted to the Connector, this plan carries a $2,000 deductible for an individual and $4,000 for a family. He warns of a "significant difference in price" for individuals according to age, industry, location and other factors.

At press time, the Connector was in the process of selecting an intermediary to handle the enrollment and billing for all the state’s non-subsidized insurance plans.

Section 125 plans - protection, but with a proviso

At the Jan. 24 breakfast forum, Hollister noted that many businesses that don’t now offer health insurance are taking a "wait and see" attitude, and in doing so, they are putting themselves at risk. That’s because the state’s free rider surcharge holds the employer liable for free health care costs over $50,000 per employee per year - an easy figure to surpass when it comes to medical expenses. He urged them to implement a Section 125 plan, which allows employees to pay for health insurance with pretax dollars - the sooner the better.

Employees who sign up for a Section 125 plan on a pretax basis must remain in that plan for a full year, unless they have a "qualifying event" such as job loss, in which they lose their job and insurance, or a family member loses a job and has to join their plan. "They can’t cancel because they found a better deal, or because they can’t afford it," he says.

But under the state law, employers are required to enforce employees to stay on the plan for a full year by continuing to take payroll deductions. "They’re promoting Section 125 as a great way to save money and it is," he says, "but you can’t [change plans or cancel] of your own free will."

Brave new world

Attorney Walter Foster of the Boston law firm Sheehan, Phinney, Bass & Green said a monthly premium of $380 "is not going to work" for its target audience of people making 300 percent of the federal poverty level. He said the "fair share contribution," now capped at $295, will be the lower of $295 or another calculation yet to be determined.

To be exempt from the $295 per employee surcharge, companies must:

• Enroll 25 percent of their workforce - measured by individuals, not by percentage of hours worked – in a health insurance plan

• Pay at least 33 percent of the premium

• Offer a Section 125 plan in which employees can buy their own insurance with pretax money.

Attorney Walter Foster of Sheehan, Phinney, Bass & Green says the Connector will probably need a year∀ˆ™s worth of market experience to determine proper pricing policies.
Foster advocated strongly for employers to set up Section 125 plans. He said on the upside, the statute permits portability, beginning to sever the employment-health insurance tie. It’s also a market stabilization, he said, free of the turnover that occurs in the workplace. A stable base of insured people, he said, would provide more reliable marketplace information on usage patterns, he said.

"This is a brave new world," he said of the administrative followup that will be required to determine which companies and their employees fall under the law’s purview. It applies to businesses with 11 fulltime equivalents, even if they are seasonal, Foster said - the final determination depends upon the number of hours worked by each employee.

Businesses will have to verify to the Connector that they have offered health insurance, even if some employees will decline it. Also, companies must offer health insurance to all workers, not just the more highly compensated ones. The result: "It’s not separating out those who can afford to pay with those who can’t," Foster said.

Most of all, he warned, employers shouldn’t assume they are exempt from liability if they pay the annual $295 per employee surcharge. The surcharge evaluates the number of individuals using free care and divides the cost by the number of companies not participating. The Connector is then to determine which portion gets assessed to each employer. But that assessment is not likely to be immediately available, Foster said – the Connector will probably need a year’s worth of market experience to establish a figure.

In the near term, the Connector Authority will review insurer rebids between now and Feb. 12. In a posting on its web site, the agency says it expects to finalize all rebid discussions as of end of business on Feb. 15.

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