Massachusetts sheds light on outcomes of healthcare reform
By Pat Haraden
Pat will present an audioconference on the financial cost of healthcare reform on Dec. 7. Click here for more information.
In 2014, the major provisions of the Patient Protection and Affordable Care Act (PPACA) will impact both employees and employers. Many employers look to Massachusetts and its experiences with healthcare reform laws for insights on how they will/should respond.
Many of the provisions of PPACA are similar to the Massachusetts healthcare reform law, which was passed in 2006. Two of the key aspects of the Massachusetts law—the individual mandate and the employer responsibility provisions—are contained in PPACA and are scheduled to take effect in 2014. There have been several surveys and predictions regarding behavior of the uninsured as well as employers when they are subject to penalties and rules regarding the offering and enrolling in health insurance.
Massachusetts’ results are interesting to review, but only in the proper context. Prior to the passage of the state’s healthcare reform law, there was already a low rate of uninsured individuals (less than 5 percent), generous employer-sponsored coverage availability, and many health plans and healthcare delivery systems to choose from. Most supporters of the law point to the remaining uninsured population (currently less than 2 percent) as a success. However, most of these previously uninsured (approximately 430,000) are now enrolled in either free or subsidized insurance plans. They are not purchasing insurance or subject to the individual mandate penalties.
To date, the law has also had no impact on reducing healthcare costs, or the rate of healthcare premium increases for businesses. In fact, the premium rates for small businesses have risen so dramatically since the healthcare reform law’s passage that lawmakers had to pass special legislation to broaden the Commissioner of Insurance’s authority over small group rate filings and review.
Employers have not responded by dropping employer-sponsored coverage. The majority of the penalties collected for the employer responsibility provisions have been on employers that do not offer coverage to certain classes of employees, but are subject to the law due to the hours the employee has worked. The primary reason that employers have not dropped coverage is not the low amount of the annual per employee “penalty” (currently $295 per employee per year), but rather the unavailability of an exchange for employees to purchase coverage.
Massachusetts has an exchange, the Commonwealth Connector; however its purpose is primarily for those who are eligible for free or subsidized insurance. It is difficult for employers to direct their employees to the Connector as there is little support provided for employers, and not all carriers participate. In addition, rates are age driven, so older employees pay more, younger pay less, which is difficult to explain to employees who are used to group rates.
Massachusetts has yet to pass a law or issue regulations to reconcile the differences between the federal and Massachusetts healthcare reform laws, making long-term strategic planning even more difficult for employers.
Pat Haraden, CEBS, CLU, ChFC, REBC, RHU, MBA, LIA, is a principal at Longfellow Benefits. He is responsible for new business development, brand awareness, client service, and Longfellow associate management and development. He provides financial and compliance advice to primarily large self-insured employers, municipalities, purchasing groups and small employers. He also provides education and awareness on funding arrangements, cost saving techniques, alternative purchasing groups, and legal and regulatory matters. Internally, Haradan serves as the regulatory and healthcare reform subject matter expert on the Longfellow team.