Last week, Governor Baker included an employer health care assessment in his budget proposal. We’ve received a few questions, and I want to underscore that offering health insurance to your employees does not automatically exempt you from the assessment. It proposes a threshold of 80 percent coverage, without exemptions for any employees who may be covered on a spouse’s plan, a parent’s plan, Medicare, etc. The attached brief summarizes the assessment issue and provides a brief analysis. We will keep you updated as we continue with our analysis of both the assessment and the rate cap proposals.
Health care costs consume approximately 40 percent of our state budget, diverting resources from other important public services like education and transportation. Solutions to rising health care costs are a key 2017 public policy priority for the Greater Boston Chamber of Commerce. Our policy team is reviewing Governor Baker’s budget proposal, particularly the proposals aimed at curbing health care costs, including a call for an assessment on employers with more than 10 full time employees whose health coverage doesn’t meet a set of state requirements, as well as proposed caps on provider rate growth.
I. $2,000 Employer Assessment
Employers will be subject to an assessment if they fail to meet certain thresholds for employee enrollment or employer contributions. According to data from the Executive Office of Health and Human Services, in the last five years more than 450,000 residents have left commercial plans, while more than 500,000 have been added to MassHealth. The administration argues that some of that increase is being driven by employed individuals enrolling in MassHealth rather than employer-sponsored insurance. While it is important to ensure that employers are not eliminating or reducing benefits and transferring employees onto MassHealth, the Governor’s proposal has the potential to impact a broader range of employers, including those offering good coverage and without any employees actually enrolled in MassHealth.
The Uptake Rate Threshold is Too High
Most problematically for our members, this proposal sets a high minimum “uptake”, or enrollment, rate for employers without allowing for reasonable exemptions. It requires an employer to have an 80 percent uptake rate, which means at least 80 percent of employees must enroll in the insurance offered by the employer. Any employee not covered by the employer-sponsored plan counts as “unenrolled” regardless of whether they have alternative coverage through another source like a spouses’ plan, a parents’ plan because they are younger than 26, Medicare because they are 65 or older, veterans’ plans, or other similar coverage. Worth noting, in 2012, the state implemented an exemption to the fair share contribution for such situations.
Employers May be Impacted by Minimum Contribution Amount
In addition, though perhaps of less concern to many of our members, this proposal also sets a minimum employer contribution rate of $4,950 per year from employers to employees’ health insurance or a qualified small employer HRA. The legislation does not specify if this rate must be offered to all employees, an average across the organization, or based on some other calculation.
In 2015, according to the Kaiser Family Foundation, the average employer contribution in Massachusetts for individual single premiums was $4,929 – less than the minimum requirement in this proposal. Note that that contribution translates to an employer share of approximately 75 percent of the total average single premium cost.
Who Gets assessed?
Employers can be assessed under either of the following circumstances:
- If an employer makes the minimum contribution (or more) but does not meet the 80 percent enrollment threshold the employer is assessed for each full-time equivalent (FTE) employee that falls between the employer’s enrollment rate and 80 percent. For example: if 75 percent of total full-time equivalent employees are enrolled in the employer-sponsored coverage, the employer would be assessed $500 per quarter, or $2,000 per year, for 5 percent of its full-time equivalent employees. Note that the calculation is based on full-time equivalents, not just full-time employees.
- An employer who contributes less than the minimum amount is assessed $500/quarter, or $2,000/year, for all FTEs.
II. Caps on Provider Rate Growth
The Governor’s budget proposal establishes caps on the rate of growth for provider rates that are negotiated between health care providers and insurers. We provide an overview of the proposal here; it is a complex issue with potentially far-reaching impacts, and we are working to understand those.
Health care providers would be separated into three tiers that would determine how much they can increase the rates they charge – if at all – every year. Caps on the rate of growth would be applied to all acute hospitals and professional service providers. Primary care and behavioral health providers would not be subject to the caps.
With the proposed tier system, there are different caps assigned to each tier. Providers would be assigned to a tier based on their costs. The lowest cost providers would be held harmless, while the highest cost providers would be most impacted and unable to increase their rates.
The growth rates may be reviewed and revised every three years. The Division of Insurance (DOI) would have regulatory authority over the caps and rate setting, and the authority to disapprove provider rates if they do not meet the tier requirements.
III. Other Provisions
GIC Provider Price Caps Could Have Broader Impact on Commercial Market
The Governor also proposes to cap rates for services provided to state and municipal employees and retirees covered under the state’s Group Insurance Commission (GIC). Rates would be capped at 160 percent of the Medicare base rate.
The GIC implementing provider rate growth caps could affect private sector employers. The GIC insures a large number of people in Massachusetts, and if their growth caps are implemented, providers may seek increases from others in the commercial market to make up for those price limitations.
Moratorium on New Coverage Mandates
The Governor proposes a five-year moratorium on new health insurance coverage mandates.