You asked for a summary of Massachusetts' new universal health insurance legislation.

This report focuses on those provisions of the new law that seem directly related to universal coverage.

SUMMARY

In early April the Massachusetts legislature passed universal health insurance legislation aimed at ensuring that every resident has health coverage. The legislation is comprehensive, including elements requiring all residents to have coverage; imposing a surcharge on employers who do not offer coverage; expanding the existing public health insurance safety net, including MassHealth (Medicaid and State Children's Health Insurance Program), while shifting resources from uncompensated care; and providing incentives for those residents who exhibit healthy behaviors.

The legislation sets up a quasi-public entity to run a new insurance program for certain uninsured residents who do not qualify for MassHealth. The entity must approve health plans for the program, which is directed at uninsured individuals and small businesses.

The legislation requires all adult state residents to have health insurance by July 1, 2007 and penalizes those who do not. It imposes a $295 annual per-employee surcharge on employers who do not offer health insurance to their workers and a “free-rider” surcharge on employers whose employees use a minimum level of free care. It also requires employers to offer so-called cafeteria plans to their employees so they can set aside pre-tax funds to pay for their health care. And it requires insurers to extend family coverage to children up to the earlier of age 25 or two years after they are no longer dependents.

The legislation makes a number of small group health insurance reforms, included opening the small group market to non-group members and allowing insurers to consider tobacco use when setting group base premiums.

It increases eligibility limits for the MassHealth program and restores cuts in benefits that were made in 2002. It also increases Medicaid rates to hospitals and physicians.

Finally, the legislation prohibits the legislature from imposing any new mandated health benefits, pending a review of existing mandates.

UNIVERSAL COVERAGE

Commonwealth Care Health Insurance Program

The act establishes the Commonwealth Care Health Insurance Program (CCHIP). It creates the new Commonwealth Insurance Connector (the Connector) whose board administers the program in consultation with the Office of Medicaid and a new Health Safety Net Office. CCHIP will offer subsidized insurance coverage from health plans that the Connector procures. Individuals pay premiums based on a sliding scale. The act authorizes the director (apparently the Connector director) to cap CCHIP enrollments in the program if its projected costs are more than what is available in a new Commonwealth Care Trust Fund.

The act directs the Connector board, after consulting with the Office of Medicaid, representatives of insurance carriers eligible for the premium subsidy, representatives of hospitals serving high numbers of uninsured residents, and health care advocacy groups to develop an outreach and education plan for the program.

Eligibility. To qualify for the program, an individual must:

1. be uninsured;

2. have individual or household income no more than 300% of the federal poverty level (FPL);

3. be a state resident for at least six months;

4. be ineligible for MassHealth, Medicare, or SCHIP;

5. not have individually or as part of a family plan employer-sponsored health insurance coverage in the last six months from an employer that covers at least 20% of the annual premium, if a family plan, or at least 33% for an individual plan; and

6. not have accepted a financial incentive from his employer to decline the employer coverage.

Assistance for Very Poor Individuals

The act appears to establish a separate health coverage program for residents with household income up to 100% of the FPL. (Generally, childless adults cannot receive MassHealth coverage unless they have a disability or little work history.) The Connector board also procures health plans for this program, which must offer, at a minimum, coverage for: inpatient, outpatient, and preventive care; prescription drugs as provided under the MassHealth program; medically necessary inpatient and outpatient mental health and substance abuse services; and dental services. Enrollees are responsible for co-payments only for prescriptions and emergency room use for non-emergency care. These co-payments are the same as those certain MassHealth recipients pay and can be waived if they cause a hardship.

Commonwealth Insurance Connector

The act establishes the Connector as an independent public entity free from supervision and control by the executive branch (unless provided by law). It is charged with facilitating the availability, choice, and adoption of private health insurance plans for individuals and groups. The act transfers $25 million from the General Fund for the Connector's administrative and operating expenses, which includes marketing its products.

An 11-member board of directors governs the Connector. The members represent the executive branch, actuaries, small businesses, employee health benefit specialists, health consumers, and organized labor. Insurance carrier employees are barred from serving on the board. Members serve three-year terms and can be reappointed.

The act authorizes the board to do a number of activities. These include offering insurance products to individuals and small businesses, publishing a schedule for premiums, and establishing an affordability schedule to be used in enforcing the below- described individual coverage mandate.

The secretary for administration and finance serves as an ex-officio board member and chairman. He must hire an executive director to supervise the Connector's administration and serve ex officio as the board secretary.

The act requires the Connector to begin offering health plans starting April 1, 2007. And it authorizes it to apply a surcharge to all plans it and its subcontractors offer, which pays for administrative and operational expenses.

The act establishes an open enrollment period for eligible individuals and their dependents to purchase health plans through the Connector. It prohibits carriers from imposing preexisting condition or waiting period provisions for anyone enrolling during this period.

Criteria for Connector Seal of Approval and Participation. The act establishes criteria that insurance products must meet in order to receive the Connector's “seal of approval.” It requires the board to give notice before withdrawing a particular health plan from its portfolio.

Small groups wishing to participate in the Connector enter into binding agreements that require the employer to agree to certain things.

Mandate that Individuals Carry Health Coverage

The act requires state residents aged 18 and over for whom an affordable health insurance product is available to have “creditable coverage” by July 1, 2007. It defines creditable coverage as a qualifying health plan type, as listed in the act and further defined by the Connector board. Residents must include information about their health insurance on state tax forms. Residents failing to meet the mandate risk losing their personal exemption for the 2007 tax year; their extra tax payments go into the act's Commonwealth Care Trust Fund.

The act exempts from the mandate individuals whose religious beliefs prevent them from using medical health care.

Starting January 1, 2008, an individual failing to have creditable coverage is subject to a penalty equaling up to 50% of the minimum insurance premium he would have paid had he purchased coverage. The penalty is paid from any tax refund or if this is insufficient, through additional taxpayer payments. The act establishes an appeals process.

The act requires applicants for the state's uncompensated care pool assistance to be enrolled in MassHealth or the Insurance Partnership Program (see below), if eligible. If they are ineligible and cannot make at least a partial payment for health care insurance, they must provide their name, address, Social Security number, and birthdate, as well as their employer's name and address. The act directs the state's labor director to collaborate with the insurance and tax departments to implement this provision.

EMPLOYER MANDATES

Fair Share Employer Surcharge

Effective October 1, 2006, the act creates a Fair Share surcharge up to $295 per year, per employee, that employers of 11 or more full-time employees must pay. Employers who are “contributing” (i.e., they offer a group health plan to which the employer makes a fair and reasonable premium contribution) are exempt from paying the surcharge. The director of the Department of Labor and Division of Health Care Finance and Policy calculate this surcharge using a statutory formula. The labor director implements it and levies penalties on employers who fail to pay it. Proponents of this provision pointed to its “leveling” effect as under the previous system, all employers paid for uncompensated care, regardless of whether they provided health coverage to their employees.

Governor Romney vetoed this portion of the act, along with a few other provisions, but the legislature is expected to override the veto.

Employer Obligation to Offer “Cafeteria” Plan

The act requires all employers of 11 or more employees to adopt and maintain “cafeteria” or “Section 125” plans (which allow employees to place pre-tax dollars into health plans) that satisfy federal law and rules adopted by the Connector. Copies of the plans must be filed with the Connector. The attorney general must enforce this provision and can seek injunctive relief.

Employer and Employee Disclosure Form

The act requires the Insurance Division to design a health insurance responsibility disclosure form that all employers and employees must sign, under oath. The form must indicate whether the employer has offered to pay or arrange for the purchase of health insurance, whether the employee has accepted it, and whether the employee has alternative insurance coverage. The form will also state that an employee who chooses to decline his employer's coverage is legally responsible for his health care costs and may be subject to sanctions that the act establishes.

Definition of Eligible Small Business

The act considers companies (1) affiliated with other companies and (2) that have the same corporate parent and can file a combined tax return to be a single business. It includes small businesses within a multiple employer welfare agreement in the definition.

INSURER MANDATES

Extension of Family Coverage

The act requires family health policies, including those from hospital service corporations and HMOs, to cover children up to age 25 or for two years past “loss of dependent status,” whichever occurs first. Coverage must continue when a child is mentally or physically incapable of earning a living on the date the policy ends for as long as the incapacity continues.

Young Adult Coverage

The act establishes “coverage for young adults” as a health plan with exact specifications to be set by the Insurance Division. Only individuals between ages 19 and 26 who do not have employer-sponsored coverage can get this coverage. These plans can be issued only through the Connector.

Policies Barred from Discriminating Against Classes of Worker

The act specifies that insurers, including hospital service corporations and HMOs, offering group or blanket policies and nonprofit hospital corporations may sell their plans to an employer only if the employer offers it to all full-time employees and the provides the same premium contribution percentage for each employee. But employers can offer greater contribution percentages to lower paid employees and separate percentages for employees with collective bargaining agreements.

Monthly List of Individuals with Creditable Coverage

The act requires all insurers to provide a monthly list of all individuals for whom creditable coverage was provided in the previous month to the Health Care Access Bureau (which the act establishes in the Insurance Division, see below).

Small Group Health Insurance Plans

The act makes numerous revisions to the state's small group insurance laws. Some of these are summarized below.

Small Group Market Open to Nongroup Members. The act opens the small group market to accept nongroup members as “eligible individuals” as of July 1, 2007. (A legislative summary states that this was expected to result in a 24% drop in nongroup premium costs.)

Tobacco Use as Factor for Group Rate Setting for Small Businesses. The act adds tobacco use as a factor in setting of group base premium rates for small group health insurance plans.

Modified Community Rate. The act adds wellness programs and tobacco use as rating categories that small group plans may use to vary the premiums charged among plan members.

Bar Against Discrimination Based on Genetics Alone. The act bars small group plans from considering genetic information as a preexisting condition in the absence of a related condition.

Emergency Services to Be Paid During Waiting Periods. The act requires small group plans to pay for emergency services provided during an insured person's “waiting period.”

Plans Permitted to Offer Restricted Networks. The act allows plans to offer restricted networks that differ from the overall carrier's network.

Free Rider Surcharge

The act requires the Insurance Division to assess a “free rider” surcharge on employers who do not provide health coverage to their employees and the employees use free care. The surcharge is triggered when an employee receives free care more than three times during a hospital fiscal year or a company has five or more instances of employees receiving free care during any fiscal year.

The division determines the surcharge amount, which must be set within three months of the end of each hospital fiscal year. It must be at least 10%, but no more than 100%, of the state's cost of paying for the services the employee receives. But the surcharge is only collected after the employer's employees incur a total of $50,000 or more in free care service in any hospital fiscal year, regardless of how many employees received these services. It establishes penalties for nonpayment or late payments of the surcharge.

The surcharge gets deposited in a new Commonwealth Care Trust Fund (see below).

The act prohibits employers from discriminating against an employee on the basis of his receiving free care, reporting or disclosing the employer's identity and other information, or completing a disclosure form. It subjects those who do to penalties under the state's unfair trade practices law.

OVERSIGHT

Health Care Quality and Cost Council

The act creates a council in the Executive Office of Health and Human Services (EOHHS) to establish health care quality improvement and cost containment goals. The council consists of state agency heads, including the insurance commissioner, the attorney general, and seven gubernatorial appointees representing various interest groups. The council must develop and coordinate the implementation of goals to lower or contain health care costs while improving access to health care, including reducing racial and ethnic disparities.

MASSHEALTH CHANGES

Massachusetts' MassHealth program offers subsidized health care coverage to the state's low-income residents. The program consists of several different coverage populations, each with its own eligibility criteria, benefit levels, and cost-sharing requirements.

Increase in Eligibility Limits

Effective July 1, 2006, the act increases the income limit for children up through age 18 to qualify for MassHealth (Medicaid and State Children's Health Insurance Program (SCHIP)) from 200% to 300% of the federal poverty level.

It prohibits MassHealth from establishing disability criteria for determining eligibility that are more restrictive than the federal government's Social Security disability criteria.

Increase in Caps for Certain MassHealth Populations

The act requires EOHHS to seek federal approval to enroll an additional 1,600 people (for 15,600 total) in the CommonHealth program. This program provides Medicaid coverage to adults (1) aged 65 and older who have disabilities and live in the community and (2) working at least 40 hours per month. Once their income reaches 100% of the FPL, participant must pay premiums.

The act also raises the enrollment cap for the MassHealth HIV+ program by 250 people and for MassHealth Essential by 16,000 people. This latter program provides certain health care services to legal aliens.

Service Restoration

Effective July 1, 2006, the act restores all of the MassHealth benefits that were reduced in 2002. These include dental, vision, chiropractic, and prosthetics.

Rate Increases

The act allocates $90 million in each of the next three fiscal years from the Commonwealth Care Trust Fund to pay for an increase in Medicaid rates to acute care hospitals and physicians. At least 15% of the increase must be for physician fees.

Incentives for Healthy Behavior

The act directs EOHHS to implement, in cooperation with the Department of Public Health (DPH), a wellness program for MassHealth enrollees to encourage activities that lead to desired health outcomes. These activities include smoking cessation, diabetes screening, and teen pregnancy prevention. It authorizes EOHHS to reduce MassHealth premiums and co-payments proportionate to the extent that enrollees comply with the program's goals.

The act also requires EOHHS to create a two-year pilot program to cover smoking and tobacco use cessation treatment and information services through MassHealth. It transfers $7 million from the state's tobacco settlement trust fund for this purpose.

Office of Health Safety Net Established

The act creates a Health Safety Net Office within the Office of Medicaid. The Medicaid director appoints the Safety Net Office's director. The new office is charged with administering the act's Health Safety Net Trust Fund (which replaces the Uncompensated Care Trust Fund and Pool), setting rates, and paying for acute care hospitals and community health centers for services they provide to uninsured or underinsured residents. The office take steps to ensure that individuals receiving services are not eligible for other public or private insurance and encourage those who might be to enroll. It must also conduct utilization review to monitor the appropriateness of payments from the fund.

The office also administers a new Essential Community Provider Trust Fund (replaces a Distressed Provider Fund), whose goal is to improve and enhance the ability of hospitals and community health centers to serve needy populations more efficiently and effectively, including through grants.

The act spells out the process the office must use to make payments to safety net providers, including requiring the providers to screen applicants for other sources of insurance overage and for potential eligibility for government programs. It requires the office to reimburse hospitals based on the Medicare reimbursement system. Health centers must be reimbursed using the federally qualified health center (FQHC) base rate, with add-ons for certain services not in the rate.

Right of First Refusal to Existing MassHealth MCOs

From July 1, 2006 through June 20, 2009, the act directs the Connector's executive director to collaborate with the EOHHS secretary to ensure that only Medicaid MCOs that have contracted with the state as of July 1, 2006 to service MassHealth recipients receive premium assistance payments from the CCHIP program, provided they meet certain enrollment targets.

MassHealth Payment Policy Board

The act establishes a MassHealth Payment Policy Advisory Board. It authorizes the board to obtain Medicaid data and analysis; conduct public hearings; review and evaluate Office of Medicaid rates and payment systems; and recommend Medicaid rates and rate methodologies that provide fair compensation for MassHealth services and promote high quality, effective, timely, efficient, culturally competent, and patient-centered care. It can report to the legislative committees of cognizance twice a year to coincide with state budget hearings and development.

Public Hearings for Eligibility and Service Restrictions

The act requires MassHealth to provide notice and hearing before restricting program eligibility or benefits.

Hospital Rate Increases Contingent on Performance

The act makes any Medicaid rate increases to hospitals contingent on their adherence to quality standards and achieving performance benchmarks, including reducing racial and ethnic health care disparities. The EOHHS develops the benchmarks, drawing on nationally approved guidelines, and in consultation with the Health Care Quality and Cost Council and the MassHealth Payment Policy Advisory Board.

MAINTENANCE OF HEALTH INSURANCE DATA

Health Care Access Bureau (HCAB)

The act requires the bureau, which is within the DOI, to maintain a database of health plan members. It requires licensed health insurers and the Office of Medicaid to report monthly the names and other identifying information, as the DOI determines, of each resident for whom creditable coverage was provided during the previous month. The division must enter into an interagency agreement with the Department of Revenue to implement this provision and must adopt regulations defining the reports' content so that they contain the minimum amount of information necessary. The reports may not contain information pertaining to previous or current health conditions or treatments.

MassHealth Enrollee Data

The act requires the Office of Medicaid to report monthly to HCAB a list of all individuals for whom it provides creditable coverage (e.g., Medicaid).

Hospitals to Report Employers of People Receiving Uncompensated Care

The bill requires hospitals' uniform reporting to the Division of Health Care Finance and Policy (in EOHHS) to include the names and addresses of employers whose employees receive free care.

Minimum Standards for Health Plans

The bill requires the DOI to establish and publish minimum standards and guidelines, at least annually, for each type of health benefit plan (except student health plans) provided by insurers and HMOs doing business in Massachusetts.

FUNDS

Commonwealth Care Trust Fund

The act establishes a Commonwealth Care Trust Fund and credits to it:

1. all Fair Share contributions,

2. Free Rider employer surcharges,

3. penalties, and

4. other revenue that will be used to pay for subsidized health insurance and Medicaid rate increases.

The bill requires that money from the fund be spent for programs designed to increase (1) health coverage, including subsidized health insurance to low-income residents under CCHIP; (2) Medicaid rates; and (3) rates paid to certain publicly operated or public-service hospitals.

The act allows trust fund money to be transferred to the state's Uncompensated Care Trust Fund in FY 07 as needed to provide payments to the state's acute care hospitals and community health centers.

Health Safety Net Trust Fund

The act creates a Health Safety Net Trust Fund, effective January 1, 2008, to replace the Uncompensated Care Trust Fund (UCTF) and requires the comptroller to transfer any remaining funds in the UCTF to this new fund. The act's Health Safety Net Office administers the fund. The fund reimburses hospitals and community health centers for a portion of the cost of services they provide to low-income, uninsured, or underinsured residents.

The fund consists of money paid by acute care hospitals and surcharge payors (similar to current payments); all appropriations for the purpose of paying these providers; transfers from the Commonwealth Care Trust Fund; and all property and securities acquired by, and through the use of, monies belonging to the fund plus any interest.

The act requires that $6 million of the trust fund be spent on demonstration projects that use case management and other methods to reduce the liability of the fund to acute care hospitals.

Essential Community Provider Trust Fund

The act establishes this fund and credits to it appropriated or transferred funds and any income from their investment. The new Health Safety Net Office must administer the fund and make payments to acute care hospitals and community health centers in accordance with criteria it establishes.

Securing Maximum Federal Title XIX and XXI Funding

The act directs the EOHHS secretary to obtain the maximum federal State Children's Health Insurance Program (SCHIP) funding. It also requires him to seek an amendment to the existing MassHealth Section 1115 demonstration waiver in order to receive maximum federal

matching funds. He must share all related correspondence with appointed House and Senate members before submitting them to the federal government.

Tax Deduction for Health Savings Accounts

The act changes the current tax law definition of “code” to include a reference to the federal Internal Revenue Code, thus creating a state tax deduction for health savings accounts.

COMMISSIONS AND OTHER STUDY GROUPS

Commission to Study Feasibility of Reducing or Eliminating Contributions Made by Employers to the Uncompensated Care Trust Fund (UCTF)

The act requires the commission to study reducing or eliminating employer contributions to the UCTF. The study must evaluate reimbursements provided from the fund for the medical care of the uninsured or underinsured patients in a hospital fiscal year and compare it to the amount the fund paid in the preceding fiscal year.

Study of Merging Small Group and Non-Group Health Insurance Markets

The act creates a special commission to study the impact of merging the state's nongroup and small group markets. The study must examine the impact a merger would have on premiums charged. It must begin meeting by May 1, 2006 and report its findings to the legislature by December 31, 2006.

Health Disparities Council

The act creates a 34-member Health Disparities Council, separate from the EOHHS, and charges it with making recommendations regarding eliminating racial and ethnic disparities in health care and outcomes in the state. The council must submit annual reports to the legislature.

Department of Public Health (DPH) Study of Community Health Workers

The act directs DPH to study (1) the use and funding of community health workers by public and private entities; (2) increasing access to health, particularly Medicaid-funded public health, services; and (3) eliminating health disparities among vulnerable populations.

It also requires DPH to convene a 14-member statewide advisory council to assist in the study.

Study of Costs of Paying Family Caregivers

The act directs the EOHHS secretary to study the costs of allowing primary caregivers to obtain MassHealth benefits if they care for, on a full-time basis, elderly parents or immediate family members who have disabilities. He must report to the Ways and Means Committee by July 1, 2007.

MISCELLANEOUS PROVISIONS

Moratorium on Legislative Mandates on Health Benefits

The act imposes a moratorium on all new mandated health benefit laws until the later of January 1, 2008 or when the EOHHS Division of Health Care Finance and Policy concludes its review of, and publishes results from, a comprehensive review of mandated benefits in effect on January 1, 2006.

Assistance for Small Business Coverage

Effective July 1, 2006, the act increase from 200% to 300% of the FPL the income limit for employees of small employers (50 or less) to participate in the Insurance Partnership Program. This program offers premium assistance to both employees and their employers who offer health coverage. The act also ensures that partnership subsidies are consistent with those provided under its Commonwealth Care subsidy program.

It specifies that self-employed individuals, who may already enroll in the partnership, are eligible for the employee subsidy only.

Plan for Implementing Health Care Reform

The act directs the EOHHS to develop, in consultation with other state agencies and stakeholders, an implementation plan and timeline detailing how the act will be implemented and how it will measure progress in reducing the number of uninsured residents.

By August 2006, the Connector's executive director must submit to the board an operation plan and any suggested changes to the law to ensure the entity's effective operation.

Report on Impact of Employer Assessment

The act directs the Labor Department and the Division of Health Care Finance and Policy to report jointly to the legislature by July 1, 2007 on the employer assessment's impact.

Website for Health Care Consumers

The act requires the Health Care Quality and Cost Council's website to be operational by July 1, 2006 and include, at a minimum, links to other internet sites that display comparative cost and quality information. By January 1, 2007, the site must, at a minimum, include comparative cost information, by facility and, as applicable, by clinician or physician group practice, for a variety of health care services. The cost information must be aggregated for all insurers, and the council may not release the payment rates of any individual insurer that is not deemed to be a public record.

RC:dw