Legislature Passes Compromised Healthcare Reform Bill

April 4, 2006

The long-awaited, and complex, health insurance reform bill passed in the legislature earlier today even though many uncertainties remain. Below is a summary of the issues I believe you will find of interest:

Strategies to improve coverage:

• Merger of the non-group and small group markets, reducing premiums for individuals by 25%.
• Existing high-deductible plans can now be tied to Health Savings Accounts.
• Family plans to allow young adults to stay on the policy for two years past loss of dependency, or until 25, whichever occurs first.
• Industry can develop special products for 19-26 year olds, offered through the Connector.
• Plans can contract with "better value" providers to keep premiums affordable.

Commonwealth Care Health Insurance Program:

• Sliding-scale subsidies to individuals with incomes below 300% of the Federal Poverty Level (FPL) ($48,000 for a family of three).
• NO PREMIUMS for people with incomes below 100% FPL ($9,700 for an individual).
• NO DEDUCTIBLES.

Insurance Partnership Program

• Eligibility for employee participation raised from 200% to 300% FPL.

Medicaid:

• Coverage of children up to 300% FPL - parents can buy cheaper individual or couples' policies.
• Raise enrollment caps on Essential, CommonHealth, and HIV program.
• Restores all benefits cut in 2002 - including dental and vision services.

Reforms Uncompensated Care:

• Eliminates current pool as of Oct. 1, 2007.
• Replaces it with Safety Net Care (SNC) Fund.
• Administered by SNC Office, in Medicaid (resources moved from current pool administrator, Division of Care Finance and Policy).
• SNC Office develops standard fee schedule to reimburse uncompensated care.
• Support for Boston Medical Center and Cambridge Health Alliance as they adjust to change from "Free Care" reimbursements to subsidized insurance premiums.

During the next three years, the plan calls for reduced reliance on the state-administered Uncompensated Care Pool. Pool payments are projected to fall from $897 million in fiscal 2008 and $480 million in 2009. As dependency on the pool drops, the state plans to increase spending on insurance subsidies from $160 million in fiscal 2007 to $725 million in fiscal 2009. Promotes stability of health care system:

• Medicaid providers receive overdue rate increases over next three years (total of $230M for hospitals across the state; $40.4M for physicians).
• Move to Safety Net Care standard fee schedule will help community hospitals.
• Creates an Essential Community Provider grant program to provide targeted support to safety net hospitals and community health centers.

Individual Mandate with Penalties for noncompliance:

• As of July 1, 2007, individuals must have health insurance.
• Individuals who cannot afford insurance, as determined by the Connector, are not penalized.
• Income tax forms will include a question about your insurance status for the tax year. DOR will verify coverage through an insurance industry database.
• Tax year 2007: loss of the personal exemption.
• Subsequent tax years: A fine equaling 50% of the monthly cost of health insurance for each month without insurance.

Employers with 11 or more employees who do not "offer to contribute toward, or arrange for the purchase of health insurance" may be assessed a "free rider" surcharge, IF:

• Their employees access free care a total of five times per year in the aggregate or one employee accesses free care more than three times.
• Division of Health Care Finance and Policy assesses the surcharge: "which shall be greater than 10%, but no greater than 100% of the cost to the state" of the free care, with the first $50,000 of costs excempted.

House Speaker Salvatore F. DiMasi and Senate President Robert E. Travaglini, who have been at odds over some aspects of the plan, stood side by side yesterday during a State House press conference and proclaimed the final bill a true compromise reached after many hours of give and take. House Speaker Salvatore DiMasi cautioned when he said, "This is just the beginning," and according to the State House News Service "the path between today's handshakes and the plan's actual enactment could be long and harrowing." The labor movement sounded a note of dissent about the mandate on individuals to purchase insurance.

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