|Last week, Governor Baker signed the awkwardly named, “An act further regulating employer contributions to health care,” which has raised many excellent questions. Once again we think about Bismarck’s quote: laws are like sausages, it is better not to see them being made. Except when laws are passed without regulation or key details, you have to dive into the sausage factory… .
Where did this bill come from?
Short answer: Governor Baker wanted spending cuts to MassHeath along with an increase in the employer contribution. The House and Senate decided to just implement the increased employer contribution without reforms or regulations. The Governor signed that bill. Surprise!
On July 19, Governor Baker issued recommendations for amendments to the State’s Fiscal 2018 budget. A short attachment suggested an increase in the employer medical assistance contribution (EMAC) and introduced the 5% employer fine. Governor Baker indicated that these two changes “must not be considered in isolation of other measures needed to manage spending in the MassHealth program. Absent other reforms, this proposal imposes an unfair burden on Massachusetts’ employers without making the structural reforms essential to MassHealth’s long-term sustainability.”
On July 26, the Massachusetts House and Senate both rejected the Governor’s amendments, reenacted the bill, and added an “emergency preamble” that stated: “Whereas, The deferred operation of this act would tend to defeat its purpose, which is to establish forthwith certain employer healthcare contributions, therefore, it is hereby declared to be an emergency law, necessary for the immediate preservation of the public convenience.”
There was hopeful speculation from the business community that, given the rejection of his recommendations, the Governor would not sign the reenacted bill. Therefore, many were surprised that the Governor signed the bill after indicating that these changes, without other reforms, imposed an unfair burden on employers was unexpected.
The “emergency” adoption of this bill contributed to the lack of information employers are now facing.
Questions? You bet! Here are some questions we received last week. We hope this provides clarity, based on the limited information still available:
Q: In your email, you said “All Massachusetts employers who have more than five employees must pay a fine – 5% of the employee’s wages – for every employee who receives his or her insurance through MassHealth.” Does this mean that if an employee elects MassHealth instead of the employer-sponsored insurance, the employer has to pay a 5% fine?
A: Yes – the employer will pay a 5% fine for each employee who receives health care through MassHealth or subsidized coverage instead of through the employer-sponsored plan.
Q: How can the employer know if the employee receives his or her insurance through MassHealth?
A: The Governor’s recommendations included some details about employer reporting and tracking. Baker’s recommendations indicated that employers: 1) would need to respond to ad hoc requests from the state; and 2) would need to complete, annually, a “Health Insurance Responsibility Disclosure” form.” However, none of this detail was carried forward into the enacted bill.The bill does not specify what obligations the employer will have with regard to tracking and reporting employee coverage. According to the bill, the department of unemployment will create and publicize regulations that address details including how many days of non-employer coverage will trigger the fines and how the fines will be paid.
It is possible that the regulations will also clarify any employer obligations with regard to tracking and reporting employee coverage. We will monitor the developments of the regulations and communicate details as they become available.
The fines will be implemented January 1, 2018 – that’s less than five months away. Therefore, employers may not have much time between the publication of the regulations and the effective date of the new law. Employers may wish to start gathering data now to get a sense as to the size of the fines they may face. They may wish to poll employees who are not enrolled in the company-sponsored plan to understand the outside coverage the employee has elected.
Q: Does the employer still pay a fine if the individual is covered under MassHealth for free?
A: Very few individuals are eligible to receive MassHealth at no cost. We have included a chart that reviews eligibility and premiums. Note, too, that most individuals who are otherwise eligible for MassHealth will be required to take their employer’s plan if the plan meets the basic coverage criteria and the employer pays at least 50% of the premium. Therefore, if your company pays at least 50% of premiums, you will generally not be subject to the fines.The bill does not currently address whether employers would be subject to fines for individuals who receive MassHealth at no cost. We do know that the fines are paid for non-disabled workers. If an employee receives MassHealth due to his/her disability, the employer would not be subjected to the fine for that employee.
Q: I read there is a $750 cap on the fine per employee. Is this true?
A: Yes, this is true. The bill indicates that the fine is 5% of an employee’s wages. However, it defines wages in this context as the “unemployment insurance taxable wage base,” which is $15,000. $15,000 * .05 = $750
Q: I understand that the fines are effective January 1, 2018. Will Massachusetts employers be subject to them year after year?
A: The bill contains “sunset” language, which indicates these fines will be repealed as of 12/31/19. It’s quite possible that, between now and 12/31/19, the sunset language will be removed or modified to push the date further out. However, as of now, these fines are effective for a two-year period only.
Q: Can I question any fines? Is there an offset?
A: Yes, The Department of Unemployment Insurance (DUI) will levy the fines and there is procedure to request a hearing. The bill also calls for DUI rates to remain the same to offset the increases in employer contributions for the 2 years the bill is in effect.
Q: What makes an individual eligible for MassHealth?
A: First, the applicant or member must be a resident of Massachusetts. Second, all those applying in the household must have a social security number or be applying for an SSN. After those basic requirements are met, eligibility is then assessed using a number of factors including citizenship, age, disability, income level, and the availability of other health coverage. We have included a chart that reviews eligibility for the different types of MassHealth coverage.
We will continue to communicate with you as we learn more about this bill. In the meantime, please reach out to us with any of your questions!