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Public Policy

FY18 Budget Update: Employer Health Care Assessment

For employers, the most discussed item in the FY18 budget is the employer assessment, which was originally proposed by the Administration. A modified version now sits before the Legislature.

Monday, Governor Baker returned to the Legislature an amendment to the assessment on employers that was adopted in the budget. The amendment adds a series of previously proposed changes to the MassHealth program and includes a request from the Governor that the Legislature hold a public hearing on the MassHealth changes within 30 days and act upon it within 60 days. The Governor also underscores that timely action is necessary to ensure the FY18 budget is balanced; without action, there is likely to be corrective budget action a few months into the fiscal year. In addition to the amendment, the Governor filed separate, stand-alone legislation that included commercial insurance market changes.

Both the amendment and the stand-alone legislation mirror a new proposal offered by the Governor while the House and Senate were in conference negotiating the budget. Rather than implementing a new employer health care assessment, the proposal increases an existing employer fee – the Employer Medical Assistance Contribution, or EMAC – across-the-board by $26 per employee and adds a surcharge of up to $750 for any employee who receives public health coverage. The increase is set to expire at the end of 2019. The proposal also sets the Unemployment Insurance rate schedule for the next two years.

In addition to the EMAC increase, the Governor’s new proposal includes changes to the MassHealth system. Several of the proposed changes require a federal waiver, including a provision that would require employer-sponsored health insurance to be the first source for health insurance. Other changes include shifting non-disabled adults with income over 100 percent of the federal poverty limit to the Connector, effectively removing them from the MassHealth system, but subsidizing costs through federal tax credits or cost sharing subsidies. Critically, those subsidies are based on the Affordable Care Act, and may change with federal action.

Worth noting, the proposal currently before the Legislature is a departure from the original $2,000 employer health care assessment that was proposed by the Administration in January. When presenting that proposal, the Administration argued that employers are shifting employees onto MassHealth rather than providing employer-sponsored coverage, and the assessment would help to fund those costs. However, it was far-reaching and would have penalized many businesses that provide employees with quality health care benefits. It also would have raised revenue, but would not directly address the rising costs of and enrollment in MassHealth. Following concerns that the Greater Boston Chamber and others raised on behalf of employers, the Legislature responded by providing a sunset, certain exemptions, and some specifics about administration of the employer health care assessment.

What’s Next:

The Legislature now needs to decide whether to accept the Governor’s amendment and hold a hearing within 30 days and act within 60 days, or send the amendment back to the Governor, again without the MassHealth reforms. If the latter occurs, the Governor has the option to veto the employer assessment. The Legislature would need a two-thirds roll-call vote in both the House and the Senate to override that veto.
While there are still many things at play, we will keep you updated with the final outcome and details of the employer health care assessment and important information your organization needs to know for implementation. We will continue to stress that placing temporary costs on employers is not a sustainable solution for addressing health care costs, and that Massachusetts needs to work towards systematic solutions in both the public and private health care markets.

View the Chamber’s analysis on previous versions of the employer assessment here:

Policy Brief: A Look at the Health Care Proposals in Governor Baker’s FY18 Budget -February 6, 2017

Policy Review: Baker’s Health Care Assessment Widely Misses Its Target- March 16, 2017

Chamber Responds to House Ways & Means Employer Health Care Assessment Proposal- April 12, 2017

Policy Review: Senate Employer Assessment Another Step in the Right Direction- May 19, 2017