In fiscal year 2018, Massachusetts will implement a $200 million employer health care assessment levied on virtually every employer in the state as a new source of revenue to help pay for rising costs to MassHealth. As a result of combined efforts from the Chamber and other business organizations, this version of an assessment is much improved over the one originally proposed by Governor Baker, with the amount reduced and the assessment is tiered so that employers with employees enrolled in public coverage pay a higher assessment. Importantly, the fee is temporary and will expire by 2020 which is critical to ensuring that our state’s employers remain competitive as incremental costs rise and new ones are added.
In addition, through a collaborative approach and advocacy with other business organizations that argued for containing MassHealth costs and enrollment, the Administration proposed changes to the MassHealth program. Although the House and Senate did not adopt those reforms, which were proposed late in the legislative process, the bigger issue of the cost of MassHealth is now a public policy priority with commitments from the Administration and the Legislature to focus on comprehensive reform to address the unsustainable costs of MassHealth.
This brief examines the evolution of the assessment, our advocacy on this issue, and where we go from here.
How did we get here?
The FY18 budget was developed within a context of uncertainty around revenue growth. In developing their consensus revenue forecast for FY18 in January 2017, the Legislature and Administration settled on an estimate of 3.9 percent growth in tax revenue over FY17, but after disappointing revenue growth in FY17, the FY18 budget eventually signed by Governor Baker in July reflected a reduced tax revenue estimate, lowered by $749 million dollars from the amount originally agreed upon in January.
Lagging revenue exacerbated issues already faced by the state in crafting its budget, particularly around health care spending. Health care costs consume approximately 40 percent of our state budget, diverting resources from other important public services like education and transportation. Moreover, spending on MassHealth, the state’s Medicaid program, has been increasing faster than state revenue growth. In an attempt to address the rising costs of MassHealth, Governor Baker included an employer health care assessment in his FY18 budget proposal filed in January. The Administration argued that the assessment was necessary to address a 70 percent increase in MassHealth enrollment over the last 10 years and that one driver of the increase is employers shifting their employees away from employer-sponsored insurance and onto state-subsidized insurance. The proposed $2,000 assessment made no distinction between those with or without employees on MassHealth, and was permanent.
“This new proposal would tax virtually all employers in the state to close a budget gap, while the underlying problems of rising enrollment in and costs of MassHealth would remain,” Chamber president James E. Rooney said in a statement. “We agree that these problems must be addressed through continued dialogue and further analysis of the true drivers of the growth in MassHealth expenses, however, penalizing employers who provide their employees with good quality health care benefits should not be part of the solution.” - Boston Globe, March 24, 2017
The Chamber’s Advocacy:
Throughout the budget process, there were extensive conversations between the Chamber, other business groups, the Administration, and the Legislature to address employer concerns with the assessment and to expand the focus to include rising health care costs in Massachusetts.
The Chamber met with the House and Senate multiple times to ensure that member concerns would be addressed. Meetings and letters to the House and Senate proved effective, as both branches included key reforms in their final budgets. Reforms included:
- A revised revenue goal of $180M as opposed to $300M
- Important exemptions for employers to limit the scope of who could be assessed
- A sunset date of two years, making the assessment temporary
“It’s clearly a step in the right direction,’’ said James E. Rooney, chief executive of the Greater Boston Chamber of Commerce. “It gives us all more time to craft a solution that is actually more targeted at the problem.” - Boston Globe, April 12, 2017
Where do we go from here?
Citing assurances from the Legislature that they would work collaboratively on addressing health care costs, Governor Baker signed into law the employer health care assessment without his proposed MassHealth reforms. In the meantime, the Administration has not ruled out a potential cut to rates paid to providers by MassHealth if cost-cutting reforms are not approved. Both the Governor and the Legislature have signaled a willingness to work on comprehensive reforms to MassHealth.
The new assessment takes effect on January 1, 2018, and the Department of Unemployment Assistance, in consultation with the Division of Medical Assistance and the Commonwealth Health Insurance Connector Authority are responsible for promulgating regulations prior to the effective date—presumably later this fall. Regulations will specify the number of days that an individual must receive subsidized health coverage in order to trigger the assessment, and the manner in which the assessment will be paid by an employer. There will be a public comment period before final regulations are issued, so we will be sure to keep our membership updated with that information.
Complicating matters, there remains a great deal of uncertainty around health care policy at the federal level, and the impacts on Massachusetts from any federal level changes could be substantial. Massachusetts receives billions of dollars in federal funding for MassHealth each year, including the majority of the funds used to pay for the Affordable Care Act’s Medicaid expansion population. The capping of federal Medicaid reimbursements and changes to cost-sharing reduction payments, would impact potential reforms at the state level.
The Chamber will remain a part of these conversations. We will continue to stress the need for sustainable solutions to health care costs rather than placing temporary costs on employers. We believe that Massachusetts needs to work towards systematic solutions in both the public and private health care markets. As representatives of the employer community, we ask that you continue to provide us with feedback on health care policy, both as it relates to your organization and in the broader context of the role you see the business community playing in solving these cost challenges.
View the Chamber’s analysis on previous versions of the employer assessment here:
Media Coverage on the Assessment featuring the Boston Chamber:
Boston Globe: Baker Administration floats alternative to health care levy- March 24, 2017
Boston Globe: House Unveils $40.3 billion state budget- April 12, 2017
WGBH: Mass House Health-Care Move Pits Baker Against Business- April 12, 2017
Boston Globe: Senate budget includes new fee on business- May 17, 2017
Boston Globe: Baker scales back plan for health care fee on employers- June 20, 2017