Governor Deval Patrick's Budget Recommendation - House 1 Fiscal Year 2014

Lowering Health Care Costs to Businesses


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Governor Patrick    FY 2014 Budget Recommendation:
    Issues in Brief

    Deval L. Patrick, Governor
    Timothy P. Murray, Lt. Governor

 

Consistent with the Governor’s priority to lower business costs and encourage job growth, Governor Patrick has filed legislation to freeze Unemployment Insurance (UI) rates for employers and reduce or eliminate the contributions they make to fund health care programs for low-income residents. This legislation will help align state health programs with the federal health care reform law, also known as the Affordable Care Act (ACA), while at the same time maintaining quality, affordable care and reducing the cost of this care for the Commonwealth’s businesses. By freezing the UI contribution rates, eliminating the Fair Share Contribution Program and Medical Security Program (MSP), and implementing an efficient and transparent employer responsibility program, in calendar year 2014 these proposals will save Massachusetts businesses $561 M.

Freeze the UI Contribution Rate

Understanding the need for businesses to have the resources necessary to invest in new jobs and innovation, the Governor has proposed freezing the employer UI contribution rate.  Freezing the UI contribution for 2013 at “E” will save employers an estimated $500 M. This marks the fourth consecutive year that Governor Patrick has advocated for freezing the UI rate in order to provide economic relief to employers. If this year’s freeze is passed, the Patrick-Murray Administration and the Legislature will have saved employers approximately $1.7 B over the last four years alone. Even with the freeze, the Unemployment Insurance Trust Fund balance is projected to end calendar year 2013 with approximately $600 M.

Eliminate the Fair Share Contribution Program and Medical Security Program

The transition of the Massachusetts health care system under ACA provided the Governor with the opportunity to reduce costs for businesses through the elimination of both the Fair Share Contribution and the Medical Security Program. The Fair Share Contribution was established under the Commonwealth’s 2006 health care reform law and mandates that employers with 11 or more full-time equivalent employees (FTEs) make a “fair and reasonable” contribution toward the health care costs of their full-time workers, or pay a $295 per FTE assessment. The ACA includes a similar policy for employers with over 50 employees, effective in 2014, that could result in double-penalties if the two policies were to coexist. 

Currently, employers contribute $187 M total annually to the MSP and Fair Share programs.  Under this proposal, there would be a 23% reduction in total employer payments to statehealth programs for the uninsured to $140 M, with contributions through the new Employer Responsibility Contribution.

By eliminating the Fair Share Contribution, the Administration will support Massachusetts employers by:

  1. Saving them significant administrative costs associated with state compliance;
  2. Allowing them time to prepare for the implementation of the ACA employer provisions noted above; and
  3. Ensuring them streamlined government, one that guards against possibly duplicative programs and assessments.

Massachusetts employers have a long history of offering generous health insurance coverage, both for economic competitiveness reasons and civic-mindedness, which is not expected to change with the elimination of Fair Share. Massachusetts employers have continued to offer coverage at very high levels, even in the face of the national economic downturn, and employer-sponsored coverage continues to exceed that in other states, with 77 percent employer-sponsored coverage in Massachusetts comparing to a 69 percent U.S. average.

This plan will also eliminate the Medical Security Program (MSP) by the end of this calendar year. MSP provides qualifying individuals receiving UI benefits with health care coverage. Through the ACA, individuals currently enrolled under MSP will be able to access subsidized health coverage through the new eligibility criteria at MassHealth, or through the state’s health insurance exchange at the Health Connector, depending on income level.

Continue to Maintain Quality Health Care, Employer Contribution

The Commonwealth will discontinue the Fair Share Contribution policy, but employers continue to share in the responsibility for health reform in Massachusetts. In order to ensure employers are contributing their share to maintain quality, affordable health care for all residents, the legislation creates an “employer responsibility contribution” for employers which will, starting in 2014, help finance the cost of subsidized care for low-income residents. The funding will be directed to the MassHealth and the subsidized plans offered under the Health Connector. Unlike the Fair Share Contribution, the employer responsibility contribution will be streamlined, efficient, and less burdensome for both small and large businesses. This contribution will be also lower than the current MSP employer assessment. By retooling this contribution, the Commonwealth maintains an original tenet of the 2006 health care reform law - that everyone has a stake in its success - and continues the Commonwealth’s commitment to quality, affordable care for all residents.

Other Initiatives to Reduce Health Care Costs on Business

Health Care Cost Containment for Businesses

Through Governor Patrick’s implementation of Chapter 224, the Commonwealth’s cost containment legislation that was signed in August 2012, health care costs for the Commonwealth’s health care programs will be reduced and cost growth in the health care system will be reined in. A decrease the cost of health care will reduce the amount health insurance plans need to pay for services and these savings will be passed on to businesses through reduced insurance premiums. Chapter 224 also includes investments in employee wellness programs. A healthy workforce is more efficient and has lower health care premiums, creating direct savings for businesses.

Health Care Workforce Transformation Fund

In August, through the collaborative efforts of the Massachusetts Legislature and the Patrick-Murray Administration, Massachusetts became the first state in the country to enact health care cost containment legislation.  The Health Care Workforce Transformation Fund was established as part of that law for the purpose of funding a wide spectrum of employee training and other programs within the health care industry. The Fund is to be administered by the Secretary of the Executive Office of Labor and Workforce Development (EOLWD) for the ultimate purpose of ensuring that Massachusetts has the skilled healthcare workforce we need to provide quality, cost effective healthcare while minimizing the economic impact on current and future healthcare workers.

Wellness Initiatives

The Department of Public Health (DPH) is in the process of implementing several wellness initiatives related to Chapter 224. One of these initiatives is a wellness tax credit program, in which small businesses can receive a wellness tax credit for a portion of the incurred costs of implementing an employee wellness program certified by DPH.

The Health Connector is also enhancing its small business wellness incentive program, Wellness Track, to encourage worksite wellness for small businesses by offering eligible employers up to a 15 percent rebate on their contribution to their employees’ health insurance for adopting wellness activities in the workplace. 

Slowing the Rising Cost of Premiums

Through the Division of Insurance’s consistent and through oversight of health insurance rates, the Administration has slowed the average annual increase in premiums from over 16 percent to just over 2 percent. Small businesses and families have saved over $600 M in premium savings since 2010.

Improving the Way Small Businesses Obtain Health Insurance for Employees

Through the Health Connector, small businesses (or brokers who assist them) have a unique opportunity to compare health insurance coverage options side-by-side, to help them find the health insurance that is right for their employees.  In FY 2014, the Health Connector will be expanding the options for small businesses, by not only offering them health insurance options that allow for apples-to-apples comparison shopping, but by also offering them the option to let their employees choose from among Massachusetts’ most popular health insurance carriers.  The Health Connector will also be the place for eligible Massachusetts small businesses to access federal tax credits of up to 50 percent of their contribution to health insurance.  In addition to offering ways to assist small businesses with paying for health insurance, the Health Connector is also working to improve the shopping experience for both small businesses and the brokers who serve them by enhancing its website and making available new tools to make purchasing health insurance easier and more understandable than ever before.


Prepared by the Executive Office for Administration and Finance ·
www.mass.gov/budget/governor
For more information email: contactanf@massmail.state.ma.us (617) 727-2040



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