Study warns Mass. reform could lose employer support

WASHINGTON, D.C. – The high cost of Massachusetts’ health reform and the heightened demands on employers could dampen employer support as the reform plays out, according to a study released last week by the Center for Studying Health System Change.
The study found employers’ frustration appears to be growing as their responsibilities increase, and the cost of increased employee take-up of employer-sponsored coverage, combined with rising premiums, could de-motivate employers.
All Massachusetts employers, except firms with fewer than 10 workers, have faced new requirements under the reform, including establishing Section 125, or cafeteria, plans to allow workers to purchase insurance with pre-tax dollars and paying a $295 annual fee if they do not make a “fair and reasonable” contribution to the cost of workers’ coverage.
Since the reform became law in 2006, 439,000 people have gained coverage, many more than the 372,000 people the state initially estimated as being uninsured.
The majority of newly insured residents, 57 percent, got free coverage through the state’s Medicaid program (MassHealth) or subsidized coverage through the Commonwealth Care program, according to the state, but nearly 160,000, or 36 percent, got it through their jobs, at an estimated additional annual cost of about $540 million to employers.
“Improving access to health care coverage has been a clear emphasis of the reform, but little has been done to address rapidly rising health care costs, raising questions about the longer-term viability of the reform,” said HSC Senior Fellow Debra A. Draper, co-author of the study.
Employer costs also are likely to increase because more residents are expected to take up employer coverage to avoid the tax penalty, which will be significantly higher than the $200 charged for 2007 – half the annual premium of the lowest-cost health plan available.
In addition, the study found some employers are frustrated that effective Jan. 1, the state plans to change what it considers a “fair and reasonable” contribution to employees’ health care costs, requiring those with more than 50 full-time equivalent employees to meet both of two thresholds allowed now – 33 percent of total premiums or 25 percent employee take-up.
The state also is going to require quarterly filings from employers to document their contributions, rather than just annual reports, and the study found that several employers believe that will create an additional burden.
The study’s findings are available free online at the center’s Web site in an issue brief titled “Massachusetts Health Reform: High Costs and Expanding Expectations May Weaken Employer Support.” The study was based on interviews with 28 stakeholders between May and August 2008, including representatives of employer groups, benefits consultants, brokers, health plans, health care providers, policymakers, advocates and other observers.
The Center for Studying Health System Change is a nonpartisan policy research organization based in Washington, D.C. It is is funded in part by the Robert Wood Johnson Foundation and affiliated with Mathematica Policy Research Inc. For more information, go to www.hschange.org.