Healthcare Reform Research PaperOL-325 Marlene Maffe’June 5, 2011 The objective is to understand the impact and employer cost as a result of Healthcare Reform to companies currently and what is to come in the future in Massachusetts and across the Nation. Healthcare Reform On March 23, 2010 President Barrack Obama signed two bills that became law; The Patient Protection and Affordable Care Act (PPACA) and the HealthCare and Education Reconciliation Act of 2010, the latter was an amendment to the PPACA and was signed into law on March 30, 2010 and the National Healthcare Reform was born.
In the state of Massachusetts, Healthcare Reform has been a reality since April 12, 2006 when the  Act Providing Access to Affordable, Quality, and Accountable Health Care was passed. Healthcare reform on the state level in Massachusetts was developed to provide affordable health insurance to all adult residents that could not afford coverage and to ensure that all adult residents were covered by a health insurance plan.
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They created the Commonwealth Connector, a program that connects residents with insurance plans that are affordable. If the resident is employed and the employer has more than 11 employees, the company is responsible for insuring their employees and offering a reasonably priced health plan that meets the Minimum Credible Coverage (MCC). The MCC is a specific list of provisions and benefits that must be included in the employer offered health plans.
If an employee is offered affordable coverage they must enroll to avoid paying tax penalties which include; losing your personal tax exemption, a penalty of $219 per each uninsured adult and also be subject to pay a penalty for each month they were not insured (half of the cost of the lowest affordable healthcare plan available). The proof of coverage is enforced by the residents state tax filing, each year every insured adult will receive a certificate of coverage from the Health Plan providing said coverage to accompany their tax filing to prove that they have health coverage.
There are some exceptions to being insured, they are heavily regulated and documentation is needed to gain the exemption from the Commonwealth Connector Authority; an example of an approved exemption is based on the individual religion that may not allow them to enroll in health insurance. The Massachusetts Healthcare Reform has mandated that employers adhere to the “Fair Share Contributions” rule.
This rule mandates that employers with 11 or more Full time employees (an employee working 35 hours or more) must have at least 25% of the eligible full-time employee population enrolled in their health plans or they must contribute at least 33% of the premium for all Full-time employees. If the employer has more than 50 employees, they must meet both of the “Fair Share Contributions Rule” to be compliant with the rule. If either sized company fails to meet these guidelines they will be required to pay a fee of $295 per employee per year.
The Commonwealth enforces the rule by requiring quarterly or annual reporting requirements imposed on employers. (part-time employees are subject to pro-rated fees) Employers must also establish a Section 125 Cafeteria Plan, this allows employees to have their contributions deducted from their pay as a pre-tax deduction. A pre-tax deduction is not subject to federal and state taxes and allows employees to reduce their taxable income and the employer saves on FICA taxes.
Employers must also adhere to a non discrimination policy that states that they will not offer a higher contribution offset to a highly paid employee than they would to a lower paid employee, all contributions made by the employer to employee must be the same. This will be an issue for companies that pay the executives premium at 100%, my company will need to change how we administer our Executive Health Plans.
The last requirement for Massachusetts Employers is that they must create and collect a Health Insurance Responsibility Disclosure Form (HIRD). This form can be combined with the employee waiver to provide information that the employer meets the Commonwealths status of all of the above requirements. The employee would complete the form and they will be informed that if they waive coverage they must show proof of coverage, the employer is required to report the employees waiving coverage to the Commonwealth.
The impact to employers as a result of Massachusetts Healthcare reform that I have found in my research depicts that there is more paperwork required by the employee benefits department to remain compliant. Employers have had to introduce new lower premium and lower cost plans to meet the Commonwealths criteria. Small business which accounts for 90% of 185,000 companies in Massachusetts has been monetarily impacted.
The small business cannot afford to comply with the “Fair Share Contribution” rule, they simply cannot absorb 25% health cost rate increases each year and subsidize the employee contributions. They have also seen an increase of almost 46% since 2001 in the average monthly premium for family coverage alone and the cost continues to rise. As a result of the increase in health costs, many small businesses are taking steps to reduce employee hours or layoff employees completely to compensate for the higher premiums, they simply cannot afford to have employees.
For the most part the Act has not imposed a significant cost change to larger employers as of yet, but that will be likely to change with the new National Healthcare Reform and the changes that accompany the law imposed by President Obama. National Healthcare Reform has now been introduced to the remainder of the United States, most employers will need to make changes to their benefits administration budget and overall benefit package based on the employer based proposed changes listed in the chart on the next page. |National Health Care Reform Changes | | |Changes for Employers |Impact to employers |Cost to employers | |Expanded Coverage for young adults |Employers are required to cover dependents up to|Insured population will increase as well as | | |age 26 regardless of status |administrative cost and claims. |Small business tax credits |This is a positive change for small business |Small businesses will receive up to a 35% credit| | |owners |towards their contributions paid for employee | | | |health cost, non profits may receive 25% | |Providing Free Preventive Care |Employers will incur additional costs not offset|Claims will likely increase because employees | | |by copayments and deductibles will be incented to have these services at no | | | |cost | |Eliminating Lifetime Limits on Insurance |Employers will incur additional costs not offset|Self-Insured employers may see an increase in | |Coverage |by copayments and deductibles |claims below the stop-loss threshold | |Regulating Annual Limits on Insurance Coverage |Employers will incur additional costs not offset|Self-Insured employers may see an increase in | | |by copayments and deductibles |claims below the stop-loss threshold | |Holding Insurance Companies Accountable for |Positive impact for employers, regulating cost |Undetermined | |Unreasonable Rate Hikes |and monitoring increases could benefit the | | | |business world | | |Bringing Down Health Care Premiums |Positive impact for employers, regulating cost |Undetermined | | |and monitoring increases could benefit the | | | |business world | | |Improving Health Care Quality and Efficiency |Positive impact for employers, regulating cost |Undetermined | | |and monitoring increases could benefit the | | | |business world | | |Proposed 40% excise tax on High value Health |Employers that are self insured with High priced|40% additional tax cost | |Plans |plans will see increased excise tax on all major| | | |benefits | | |W2- Reporting of employees value of benefits |Employers may incur implementation fees with |Undetermined | | |their payroll vendors to update the reporting | | | |tool | | |Automatic enrollment of employees into health |Employers will incur at least the first month’s |Undetermined | |plan |administration fees for the auto enrollment. | | |This will also require additional man-hours to | | | |enroll and un-enroll | | Once the dust clears and the changes are in place Employers, Insurance companies and consumers will not see the intended affordable health with out a large cost. Brokers such as Mercer, Towers Watson and Price, Waterhouse, Cooper are projecting that employers will see up to a 4% to 8% increase on healthcare cost in addition to the regular market trends. Self-Insured plans will no doubt bear the brunt of the cost shift with the elimination of lifetime and the regulation of annual limits. Employers as a whole are concerned about the excise tax increase, mandating the coverage of dependents to age 26 regardless of status.
Employers are also concerned about the first dollar coverage of services on preventative services with out the cost sharing with co-payments and deductable on in patient/out patient testing. Employers will have to increase what they pay for lower paid employee’s contribution in order to stay compliant and lastly, the concern of additional cost for plan analysis to ensure compliance and the new administrative cost, such as fees and new brochures layouts to inform the employees of rights and changes. In the Towers Watson Health Care Trend Survey, (ironically enough I actually participated in this one) they discovered that most companies will adopt account based health plans such as HSA’s to control costs, raise employee contributions, invest in wellness programs to incent employees to take care of themselves. I have read more han once during my research that a lot of companies are considering or already have implemented a plan that shifts higher premium cost to employees that will not take part in a wellness program. These programs will reward the employees that participate and penalize the ones that do not participate. Employers will need to be more and more creative to contain costs. Employers will need to educate their employees on why costs are increasing and what they can do to keep cost down. They have no choice with the “Pay or Play” mandate handed down when the Healthcare Reform became law. In conclusion, The Patient Protection and Affordable Care Act (PPACA) and the HealthCare and Education Reconciliation Act of 2010, was designed to insure the millions of Americans that cannot afford health insurance at all.
I am an upstanding person with plenty of compassion with the need to assist my fellow Americans, I give to charities. I also work hard for my compensation and benefits as do most of the other millions that work and pay for health insurance. The belief is that all will right in the world when this program is fully incorporated, after reading and researching, I am not too sure that this will work as proposed. The tax payers will have to eventually subsidize the cost of all of the government created programs that are going to insure the Americans that need insurance, how else will the Medicare and Medicade reforms and the new exchange programs be paid.
The insurance companies cost will go up, the employers cost will go up and then be passed down to us the tax payers. Life in America! Reference Page: References: Massachusetts Division of Health Care Finance and Policy, “Health Insurance Status of Massachusetts Residents, Fifth Edition” (December 2006). Web. The Commonwealth Health Insurance Connector Authority, accessed July 12, 2007. Web. 3. The Commonwealth Health Insurance Connector Authority, “Health Care Reform Answers for Massachusetts Businesses,” News Release (June 22, 2007) Web. Employee participation levels for small companies with 11 to 50 full-time equivalents (FTEs) declined from 78 percent in 2007 to 75 percent in 2009. Amy M.
Lischko and Kristin Manzolillo, “An Interim Report Card on Massachusetts Health Care Reform—Part 2: Equitable and Sustainable Financing,” Pioneer Institute White Paper No. 51, February 2010, p. 5, at (August 16, 2010). Web. Massachusetts Executive Office of Health and Human Services, Division of Health Care Financing and Policy, “Fair Share Contribution Data Trend Analysis Filing Years 2007 and 2008,” October 2009, at (August 10, 2010). Web. Data compiled from Massachusetts Office of Health and Human Services, “Massachusetts Employer Health Insurance Survey (June 23, 2010). Web. mercer blurb/179623/article/20106649/ Web. towerswatson. com/united-states/press/2789 Web healthcare. ov/law/introduction/index. Web ceridian. com/human_resources_article/1,6266,15760-72873,00. Web. ———————–  Patient Protection and Affordable Care Act (PPACA) Public Law 111-148  Education Reconciliation Act of 2010 Public Law 111-152  Act Providing Access to Affordable, Quality, Accountable Health Care St. 2006 C. 58  Minimum Credible Coverage (MCC) Commonwealth Insurance Connector Authority, 956 CMR 5. 00  Section 125 Plan, Commonwealth Insurance Connector Authority , 956 CMR 4. 00  Patient Protection and Affordable Care Act (PPACA) Public Law 111-148  Education Reconciliation Act of 2010 Public Law 111-152