Massachusetts Health Reform

1
Massachusetts Health Reform

• ERISA Industry Committee
• July 31, 2007

2
The Uninsured in Massachusetts

• Total Commonwealth Population

6,200,000

• Insured (94)

5,830,000

• Uninsured (6) summer 2006

370,000
lt100 FPL
70,000
Medicaid Eligible but unenrolled
0-300 FPL
140,000
Commonwealth Care
gt300 FPL
160,000
Affordable Private Insurance
Note Based on August 2006 Division of Health
Care Finance and Policy statewide survey
3
MA Landmark Health Care Reform Law

• Government subsidies for low-income uninsured
• Individuals age 18 and older to have health
  insurance by July 1, 2007
• Employers w/ 11 full-time equivalent employees
  to provide premium contribution pre-tax payroll
  deduction
• Reform the small- non-group market
• Increase MassHealth reimbursement levels (P4P)

4
Health Connectors Mission Insure as many as
possible

• Create choice of affordable insurance products
• Consolidate administration of group insurance
• Deliver high quality customer service
• Keep the process simple and transparent
• Improve the portability of health insurance

5
What the Connector Does

• REGULATORY
• Commonwealth Care benefits premiums
• MCC Regulation
• S. 125 Regulations
• Affordability Schedule
• Waivers Appeals

• ENTERPRISE
• Qualify enroll for CommCare
• Seal of Approval for CommChoice
• Sell CommChoice
• Individuals
• Non-group employees
• Small employers

6
Commonwealth Care Enrollment thru 7/1/07
7
Employer Responsibilities

• Section 125 Plan Offering
• Fair Reasonable Employer Contribution
• Employers may choose to make contributions to
  their employees health insurance or to make
  payments that ultimately help offset the States
  healthcare costs
• Health Insurance Responsibility Disclosure (HIRD)
  Form
• Non-discrimination Provisions

8
Helping Employees Connect to Good Health
3
9
Options Under Commonwealth Choice(37-year old)
10
How Does This Compare With What is Available Now?

• The 184 plan is half the 335 premium this same
  individual would pay now
• The 335 premium currently available buys less
• No Rx coverage
• 5,000 deductible
• The 175 plan covers
• Rx
• Office visits ER visits immediately, plus 80
  of other costs after a 2,000 deductible

11
Minimum Creditable CoverageThe lowest level of
insurance an individual may purchase to avoid the
mandate.

• Comprehensive health plans, include Rx
• No annual or per sickness benefit maximum
• 3. No indemnity fee schedule of benefits
• Deductible capped at 2,000/4,000
• Cover (3/6) preventive care visits
• Out-of-pocket max. of 5,000/10,000

12
Individual Mandate

• Tax Year 2007 MA residents age 18 and older
  without minimum creditable coverage will lose the
  personal exemption unless they have an approved
  waiver (e.g. based on affordability, hardship)
• Tax Year 2008 and later Penalty will be 50 of
  what an individual would have paid toward
  affordable health insurance coverage for one
  year

13
Affordability Schedule and Regulations

• Flexible enforcement
• Accounting for individual circumstances
• Robust appeals process
• Require Participation in Commonwealth Care
• For the rest, keep it simple
• Excuse lower-income brackets
• Assume affordability for upper-income brackets
• Progressive sliding scale of premium
  contributions, stated as dollars/month, in
  between for singles, couples and 3
• Benchmark affordability for ESI based on
  Commonwealth Care rates

14
Implementing a Commonwealth Choice Voluntary Plan
15
Commonwealth Choice Overview

• Not subsidized
• Individuals who earn more than 300 of FPL
• Options from six insurers have earned the Health
  Connectors Seal of Approval
• GOLD, SILVER, BRONZE and YOUNG ADULT Commonwealth
  Choice plans are available
• Via a Section 125/Voluntary Plan (pre-tax)
• Direct (after tax)
• Pharmacy options available
• Available to small businesses (lt50 employees) on
  contributing basis in the future

16
Commonwealth Choice Eligibility

• Residents of Massachusetts age 18 or older (or
  under 18 with the
• permission of a parent/guardian) living within
  the health plans service area who
• Participate in an employers Section
  125/Voluntary Plan, OR
• Work for an employer with 50 employees but do
  not participate in the employers Section
  125/Voluntary Plan OR
• Work for an employer with gt50 employees but do
  not participate in the employers Section
  125/Voluntary Plan, and
• are not eligible for employer sponsored
  insurance or
• are within a waiting period for employer
  sponsored insurance or
• are eligible for employer sponsored insurance,
  but do not receive an employer contribution of at
  least 33 toward the cost of the employee health
  insurance (individual coverage) or
• are eligible for employer sponsored insurance,
  but the health insurance offered by the employer
  does not meet minimum creditable coverage
  standards

17
The Commonwealth Choice Advantage

• Aggregates options available from six quality
  insurers (e.g. Travelocity)
• Options comply with minimum creditable coverage
  (MCC) requirements
• Employee enrollment is easy
• Eligibility, billing and premium payment
  processes are streamlined for the employer

18
Key Dates for Section 125/Voluntary Plan
Implementation

• A Section 125 Plan must be established by July 1,
  2007 that provides access to one or more health
  coverage options on a pre-tax basis
• Allowable Section 125 eligibility waiting
  periods
• Up to 2 months if employer does not contribute
  (Voluntary Plan)
• Corresponds with health care coverage option(s)
  if employer contributes
• Commonwealth Choice coverage begins on the 1st of
  the month following
• enrollment by the employee, AND
• submission of the first full months premium by
  the employer
• Pilot for EDI (ASCII) process targeted to begin
  August, 2007

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Starting a Section 125/Voluntary Plan

• Create a Section 125 Plan and designate
  Commonwealth Choice
• Set up an account with the Health Connector,
  including company information and signed Terms
  Conditions agreement
• On-line, by fax or by mail
• Submit Section 125 Plan-employee information
  (eligible or participating employee listing) to
  the Health Connector
• On-line (data entry or Excel)
• Piloting EDI
• Communicate Commonwealth Choice employer ID
  number to eligible employees (to shop and
  enroll)
• Once employees enroll, receive bill for premiums
  due from the Health Connector based on employee
  selection
• Submit monthly premium payments to the Health
  Connector via check, EFT, wire transfer or money
  order
• Note Commonwealth Choice health insurance
  coverage
• begins on the 1st of the month following
• Enrollment by employee
• Receipt of 1st months premium by Health
  Connector
• Update Section 125 eligibility/participant
  information

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Employer Account Set-up

• Set up an account with the Health Connector,
  including company information and signed Terms
  Conditions agreement
• On-line, by fax or by mail
• Submit listing of eligible or participating
  employees
• On-line (data entry or Excel)
• At least one eligible employee must enroll within
  two months from the date the employers account
  is set up for the account to remain active
• The groups effective date is the 1st of the
  month following account set-up

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Enrollment

• Coverage begins on the 1st day of the month
  following enrollment and payment of 1st months
  premium and ends on the last day of the month
• Once an employee enrolls, a bill will be
  generated (45 days in advance of the effective
  date)
• Employees who enroll by August 15th may become
  effective on October 1, 2007
• Employees who enroll between August 16 and August
  31, 2007 may become effective on November 1, 2007
  
• For employees who need coverage sooner, the
  Health Connector accepts post tax payments made
  directly by an individual
• Employees who do not enroll within the enrollment
  period will have to wait until the employers
  next annual enrollment period (unless they have a
  qualified change in status event) or can purchase
  coverage directly through the Health Connector on
  a post-tax basis

22
Billing/Premium Payment

• Rates are calculated based on the employees
  demographics at the time of enrollment (e.g. age
  and zip code) and are based on the employers
  effective date
• The Health Connector will send the employer a
  single bill of premium amounts due based on
  employee selection
• Once an employee makes a selection and enrolls, a
  bill will be generated (45 days in advance of the
  effective date)
• Monthly billing statements are issued about the
  15th of the month (45 days prior to the coverage
  month)
• Premiums are due on the 10th of the month prior
  to the coverage month but may be accepted up to 5
  business days prior to the beginning of the
  coverage month
• The employer submits premium payments to the
  Health Connector via check, EFT, money order or
  wire transfer

23
Billing/Premium Payment (cont.)

• The employer is not responsible for any premium
  shortfall
• Accounts are considered delinquent when a partial
  premium payment, or no payment, is received prior
  to the first (1st) day of the coverage month
• If an account is delinquent for 60 days from
  first day of the coverage month that payment is
  due, coverage will be terminated
• Any credit balances are returned to the employer
  after cancellation or termination of coverage
• Re-instatement of lapsed coverage is allowed
  twice per plan year as long as all back premiums
  and reinstatement fees are paid and coverage has
  not lapsed for more than 90 days

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Changes/Renewals

• Employer notifies the Health Connector of
  eligibility changes
• Changes are allowed when a subscriber has an
  eligible status change event or moves out of the
  plans service area
• Renewals are 12 months from the groups effective
  date
• Employees hired mid-year will renew on the
  groups renewal date
• Employees are locked in/out until the groups
  next open enrollment period

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Section 125/Voluntary Plan TimelineSample 1

• Key assumptions
• CommChoice enrollment period and Section 125
  waiting period run concurrently
• July 1st Section 125 Plan effective date and 2
  month waiting/enrollment period
• The employer must set up an account with the
  Health Connector before employees can enroll,
  including
• Employer information
• Terms Conditions
• Employee census
• During waiting/enrollment period employees can
  shop for/enroll in Commonwealth Choice
• 1st Commonwealth Choice effective date is October
  1st
• 1st notification to employer of payroll deduction
  amounts is August 15th
• 1st premium payment from the employer to the
  Health Connector is September 10th
• Employee Commonwealth Choice coverage is
  effective on the 1st of the month following
• enrollment
• payment of the full first months premium
• Employees have the option to pay the monthly
  premium direct (after-tax) to begin
• coverage on September 1st or sooner

Note The Health Connector will accept payment
up to 5 business days prior to the benefit month.
26
Section 125/Voluntary Plan TimelineSample 2

• Key assumptions
• CommChoice enrollment period is subsequent to
  Section 125 waiting period
• July 1st Section 125 Plan effective date and 2
  month waiting period
• The employer must set up an account with the
  Health Connector before employees can enroll,
  including
• Employer information
• Terms Conditions
• Employee census
• Employees can shop for/enroll in Commonwealth
  Choice following the 2 month waiting period
• Commonwealth Choice enrollment period is from
  September 1st to September 30th
• 1st bill (notification to employer of payroll
  deduction amounts) is September 15th
• Premium payments must be received no later than 2
  business days prior to the beginning of the
  coverage month
• Employee Commonwealth Choice coverage is
  effective on the 1st of the month following
• enrollment
• payment of the full first months premium
• 1st Commonwealth Choice effective date is
  December 1st.
• Employees have the option to pay the monthly
  premium direct (after-tax) to begin coverage on
  September 1st or sooner

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For more information

• Contact the Health Connector
• By phone
• 1-877-MA-ENROLL (623-6765)
• or
• By e-mail Connector_at_state.ma.us

• Or visit the Health Connectors website at
• www.MAhealthconnector.org

• Your Connection to
• Good Health

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• Section 125 Plan Requirements
• __________________________________________________
  _
• Other Employer Responsibilities

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Employer Responsibilities (11 FTEs)

• Fair Reasonable Employer Contribution (or Fair
  Share Assessment)
• Effective 10/1/06
• Primary test based on data from 10/1/06 9/30/07
• Secondary test based on coverage from 7/1/07
• DHCFP final regulation issued 10/06
• DUA proposed regulation issued 4/20/07
• Section 125 Plan Offering (Free Rider Surcharge)
• Effective 7/1/07
• Final section 125 regulation issued 6/5/07
• Admin Bulletin 02-07 issued 6/29/07
• Emergency surcharge regulation/form issued
  6/21/07
• Health Insurance Responsibility Disclosure (HIRD)
  Forms
• Effective 7/1/07
• Employer HIRD filed electronically with FSC data
  each November
• Emergency regulation/form issued 6/21/07
• Annual 1099-HC style statement

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Determining 11 FTEs

• Fair Share Contribution, HIRD and Surcharge
  requirements (based on payroll from 10/1/06
  9/30/07)
• Section 125 (based on payroll from 4/1/06
  3/31/07 10/1 thereafter)
• Calculation
• Payroll hours for all who worked for at least a
  month
• Includes part-time, temporary and seasonal
  employees
• 2000 hours max. for any one employee
• Divide total hours by 2000

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M.G.L. c. 151F

• Section 2.  Each employer with more than 10
  employees in the commonwealth shall adopt and
  maintain a cafeteria plan that satisfies 26
  U.S.C. 125 and the rules and regulations
  promulgated by the connector.  A copy of such
  cafeteria plan shall be filed with the connector.

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Intent of M.G.L. c. 151F

• Increase employer sponsored access to health
  insurance through cafeteria plans
• Make it more affordable for individuals to comply
  with the mandate through net tax savings
• Give employers some tax incentive as well as
  relief from the Free Rider surcharge

33
Traditional Cafeteria Plan Concepts

• A Federal tax code animal IRC 125
• An employer sponsored plan
• Provides choices among other employer sponsored
  group plans a conduit or election vehicle.
  Benefit right to make choices.
• Does not provide any substantive benefits
• Does not trigger ERISA compliance issues

34
Connector Section 125 Regulation956 CMR 4.00

• Addresses use of Section 125 Plans for purposes
  of MA health care reform
• Adopted March 20, 2007 as emergency regulation by
  Connector board
• Public hearing held on April 27, 2007
• Written comments submitted through 4/27
• Final adjustments voted on at June 5 board mtg
• Admin Bulletin 02-07 issued June 29, 2007

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Connector ObjectivesFor 956 CMR 4.00

• Promote increased access to health insurance
• Ease administrative burden on employer
• Coordinate with other state agencies implementing
  Health Care Reform
• Do not invite ERISA challenges

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Two Chapters from the HCR Story

• Ch. 118G - Surcharge
• An employer who complies with 151F with respect
  to an employee is not subject to the Free Rider
  surcharge if the employee receives uncompensated
  care.

• Ch. 151F - 125
• Increase access to health care by adopting and
  maintaining a plan satisfying Code 125 and
  Connector rules. A win/win for the employer and
  the employee

37
Employer Surcharge for State-Funded Health Costs
(a/k/a Free Rider Surcharge)

• May be assessed on employers gt 11 employees not
  offering
• 125 plans to employees receiving uncompensated
  care
• HCR requires the surcharge to be assessed if more
  than 50,000 per year in free care used, and
• one employee or dependents receive free care more
  than three times in the year, or
• employer has five or more instances of employees
  or their dependents receiving free care in the
  year
• The surcharge varies by employer size and free
  care utilization

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Overview of 956 CMR 4.00

• Each employer with 11 or more FTEs at MA
  locations must adopt and maintain a Section 125
  Cafeteria Plan, effective 7/1/07
• Practical Effect
• Employers with existing Section 125 Cafeteria
  Plans should
• Amend Current Plan to Expand Eligibility, or
• Establish Second Plan for Employees Not Covered
  by Group Health Plan

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Overview of 956 CMR 4.00

• The plan must, at minimum, be a premium-only
  plan that allows employees to pay for or
  contribute to the cost of medical care coverage
  on a pre-tax basis.
• The plan must offer eligible employees access to
  one or more medical care coverage options.
• No FSAs required
• Employers do not need to contribute to the cost
  of medical care coverage options available under
  the plan.
• No plan configuration restrictions
• Special exception from 151F for employers
  providing noncontributory medical coverage to all
  employees (dependents) not otherwise excluded

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Overview of 956 CMR 4.00

• 125 eligibility requirements determined by the
  employer
• Eligibility waiting period can match GHP wait
  period where employer contributes
• Up to 2 month 125 plan eligibility waiting
  period permitted for employee pay all coverages
• Optional 1-time extension to 9/1/07 for those who
  are employed on 7/1/07
• Employers may exclude certain classes of
  employees from the plan and still be compliant
  for Free Rider Surcharge purposes
• A copy of the 7/1/07 plan document must be filed
  with the Health Connector between 9/1/07 and
  10/1/07 pending further guidance

41
Excludable Employees for 125 Plan Purposes

• Employees younger than 18
• Temporary employees
• Employees working, on average, fewer than 64
  hours per month
• Wait staff, service employees or service
  bartenders who earn, on average, less than 400
  in monthly payroll wages
• Student Employees who are employed as interns or
  as cooperative education student workers
• Seasonal employees who are international workers
  with either a
• U.S. J-1 student visa, or
• U.S. H2B visa and who are also enrolled in travel
  health insurance
• Employees whose employer is required to
  contribute to a Multiemployer Health Benefit Plan
  based on their employment

42
Fair Share Contribution
Primary Test
Secondary Test
33 employer contribution to an individual
health plan
OR
25 participation

• 25 or more of full-time employees enrolled
• MA employer based regardless of residency
• Based on payroll hours

• Full-time employees
• Employed at least 90 days

Employers who fail both tests are subject to a
295 assessment per employee per year (pro-rated
for part-time employees)
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Fair Share ContributionFull-time Employee
Definition

• 35 or more hours per week who work in MA
  (regardless of residence)
• Excludes independent contractor, seasonal
  employees and temporary employees
• Seasonal employee
• Works during employers seasonal period
• Employment does not exceed 16 weeks
• Temporary employee
• Full or part time
• Employment doesnt exceed 12 consecutive weeks
  within 1 year
• Independent contractor
• As defined by Mass General Law

44
Health Insurance Responsibility Disclosure (HIRD)

• File Employer HIRD Form
• Filed annually (date to be announced by DHCFP)
• Filed electronically as part of annual FSC filing
• Maintain Employee HIRD Form
• Signed by employees who
• Decline employer-sponsored coverage
• Decline use of Section 125 Plan for medical
• New hires
• Annual open enrollment
• Status changes where coverage is terminated while
  remaining employed
• Retain for 3 years
• Emergency regulation/form issued by DHCFP 6/21/07

45
Annual 1099-HC Statement(effective 1/1/08)

• Employers must provide or contract to provide by
  1/31
• Annual written statement to each subscriber
• Separate electronic report to DOR
• Statements and reports must identify
• Carrier or employer
• Covered individuals/dependents w/dates of
  coverage
• Policy or group numbers
• NO SSNs
• Penalty 50 per ind. / 50k max per year