Changes to Health Insurance in the Workplace are on the Horizon

On July 28th, Senator John McCain unexpectedly cast a no vote on the latest iteration of health care reform, the Trump administration’s Affordable Health Coverage (AHC) plan. McCain cast the deciding vote, leading to the defeat of the plan, seemingly ending any chance of enacting the AHC in the foreseeable future. While modifications to health care on the national level appear unlikely this year, Massachusetts employers and employees are facing important changes.

In 2006, Mitt Romney, then governor of Massachusetts, introduced a revolutionary proposal regarding health care. With the passage of the proposal, all workers in Massachusetts were required to obtain health insurance. Those who did not would be penalized. Employees could obtain health insurance through the newly-created state exchange, the Massachusetts Health Insurance Connector, or through their employers.

A critical component of the reform was a provision that required all employers with more than 11 fulltime equivalent employees to offer health insurance that met minimum affordability and coverage standards. Romney promised that the reforms would not only provide access to health care for all Massachusetts residents, but also help control the spiraling cost of health care.

With the passage of the Affordable Care Act (ACA) by the Obama administration, Massachusetts health care reform came to an end. This reset the threshold for the minimum number of employees at which an employer must provide health insurance from 11 to 50. As businesses in Massachusetts with fewer than 50 workers began dropping the health insurance plans they were no longer required to provide, the number of workers participating in MassHealth – the state’s Medicaid program – spiked.

There are currently 1.9 million Massachusetts residents covered by MassHealth, a significant increase since the advent of the ACA. MassHealth spending now represents 40% of the state’s annual budget of $40 billion which is draining resources from essential programs such as education and transportation. Once considered the “health care of last resort,” MassHealth increasingly serves as a substitute for costly employer plans.

In an effort to control the spiraling cost of MassHealth, Governor Baker signed into law H.3822 on August 1st. The new law increases the current Employer Medical Assistance Contribution (EMAC) which applies to Massachusetts employers with more than five employees, regardless of whether or not the employer offers health insurance. It also imposes a new assessment on businesses with employees who are receiving MassHealth. This assessment also applies to all businesses with more than five employees.

The current EMAC is .34% with a maximum of $51 per employee per year. In 2018 and 2019, the EMAC will increase to .51% with a maximum assessment of $77 per employee per year, which is expected to increase revenue by $75 million in 2018. Under the new MassHealth assessment, employers will be required to pay 5% of annual wages, with a maximum of $750 per employee per year, for any non-disabled employee enrolled in MassHealth (excluding the premium assistance program), or who receives subsidized health coverage through the Connector. The MassHealth assessment is projected to raise $125 million in revenue in 2018.

More than 10 years after the passage of RomneyCare, health care policy remains a mess in Massachusetts. With so many unanswered questions still on the table, the only thing certain is that employers in Massachusetts will soon be paying more for health care.