 |
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
 |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
 |
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
 July 2, 2007
MASSACHUSETTS STARTS TO IMPLEMENT LANDMARK HEALTH CARE REFORM There have been many significant new developments concerning the Massachusetts Health Care Reform Act 1 since The Segal Company published its February 22 Capital Checkup on this groundbreaking piece of legislation.2 The effective date for several provisions was July 1, 2007. This Capital Checkup highlights the major new changes and interpretations of this important and evolving state law initiative, including:
This Capital Checkup also discusses the “fair share” contribution requirement and the dependent coverage extension. In addition, it includes a compliance chart.
The Individual Mandate: Minimum Creditable Coverage, Affordability and Effect on Plan Sponsors Under the Massachusetts Health Care Reform Act, by July 1, 2007, all adult residents of Massachusetts age 18 or older are required to have health coverage that qualifies as “creditable coverage,” as long as it is deemed affordable by the Connector. “Creditable coverage” is defined to include individual and group health plan coverage that meets the definition of “minimum creditable coverage” as established by the Connector Board. Under the final rule, an MCC plan must provide coverage for a broad range of medical benefits, including preventive and primary care, emergency services, hospitalization, ambulatory services, prescription drugs and mental health services. The plan may impose various levels of copayments, deductibles and coinsurance, as long as they are disclosed to covered persons; the in-network deductible does not exceed $2,000 per person/$4,000 per family; and any separate deductible for prescription drugs does not exceed $250 per person/$500 per family. If a plan has deductibles or coinsurance for in-network core services, the out-of-pocket plan maximums for those services cannot exceed $5,000 per person/$10,000 per family. Also under the final rule, an MCC-compliant plan cannot impose an annual maximum benefit or per-illness benefit annual maximum on covered core services, defined as “physician services, inpatient acute care services, day surgery and diagnostic tests and procedures.” Importantly, the MCC final regulations will not be implemented until January 1, 2009. In the interim, MCC will be deemed to be any insured plan that meets Massachusetts’ insurance requirements or any self-funded health plan that provides medical, surgical or hospital benefits. The Board has also approved final regulations for determining whether MCC is affordable for state residents. By June 1 each year, the Board will issue an Affordability Schedule that establishes the percentage of an individual's adjusted gross income that he or she can be expected to contribute towards the cost of health insurance that meets MCC standards. The Board is also required to adopt a Premium Schedule that establishes the lowest level of premiums to be available for MCC for the calendar year. The Massachusetts Department of Revenue (DOR) will enforce the individual coverage mandate through state income tax filings. For 2007, residents who do not comply will lose their personal exemption (subject to appeal). For 2008 and beyond, noncompliance results in a penalty of up to 50 percent of the monthly minimum insurance premium for creditable coverage for that resident. In addition, although the individual coverage mandate goes into effect on July 1, 2007, as long as an individual can certify on his or her 2007 state income tax return that as of December 31, 2007 he or she had coverage, the Connector has clarified that penalties will not be assessed for this year. Plan sponsors are not required to provide health coverage that meets the MCC criteria. However, they should pay close attention to the MCC criteria, because it may indirectly affect the benefits that they choose to offer to plan participants. For example, since individuals must have MCC by January 1, 2009, plan sponsors may be asked by participants whether the health coverage they provide meets these standards, and if not, whether the plan’s benefits, cost-sharing provisions or other terms can be amended to comply with the MCC requirements. In order to be prepared to respond to this request, plan sponsors should review their coverage for 2007 and 2008 to determine whether it would satisfy MCC, and then decide whether to change the coverage for the 2009 plan year. (To return to the list of developments at the top of this Capital Checkup, click here.)
Effective July 1, 2007, employers with 11 or more employees in the state must adopt and maintain a cafeteria plan that satisfies the requirements of §125 of the IRC and offers employees access to one or more health plans. The cafeteria plan requirement is limited to premium-only arrangements, specifically, a payroll deduction program to facilitate the pre-tax payment of health benefit plan premiums by employees. This will enable employees to save money by paying for their health coverage with pre-tax dollars. Depending on what the employer decides, the cafeteria plan could allow pre-tax contributions for the employer’s health plan, a health plan offered through the Connector, and/or an individual policy purchased by the employer. Segal has released a comprehensive Bulletin outlining the key elements of the Massachusetts Cafeteria Plan Requirement.8The final rule, approved June 5, 2007, contains a few technical changes from draft regulations. Also, on June 29, 2007 the Connector issued an Administrative Bulletin that postponed the date that employers must file their cafeteria plan with the state to October 1, 2007. The Connector recently issued a “Section 125 Plan Handbook for Employers.”9. Included in the handbook are model cafeteria plan documents and forms to enable small employers subject to this requirement to adopt a compliant cafeteria plan.10 (To return to the list of developments at the top of this Capital Checkup, click here.)
Fair Share Contribution Requirement Massachusetts requires employers with 11 or more full-time equivalent employees11 in Massachusetts to pay an annual fee of up to $295.00 (the fair share contribution or FSC) per employee to the state if they offer no health plan at all, or fail to make a fair and reasonable premium contribution to their plan. The DHCFP has issued final regulations that set out the tests to be used by employers to determine what is a fair and reasonable premium contribution.12 This fair share contribution is discussed in more detail in Segal’s February 22, 2007 Capital Checkup.2 Separately, employers are required to file a report with the state Division of Unemployment Assistance (DUA) to determine their liability for the FSC. According to draft regulations issued by the DUA in April 2007, employers must file this report by November 15 each year. Other DUA guidance indicates that the report will encompass payroll, employment and health insurance data for the 12-month period ending the prior September 30. DUA is currently developing a Web-based online application for these reports. Final regulations for determining when an employer is liable for the FSC and procedures for filing reports and paying the FSC are expected by the end of July. (To return to the list of developments at the top of this Capital Checkup, click here.)
Certain employers will also be assessed a free rider surcharge equal to a percentage of the State’s cost of providing free health care to the employer’s uninsured employees.13 Under the DHCFP’s emergency regulations effective July 1, 2007, the surcharge applies to an employer with 11 or more full-time equivalent employees that is not in compliance with the requirement to adopt and maintain a cafeteria plan (i.e. a “Non-Providing Employer”). The surcharge will not be assessed against an employer that is a signatory to or obligated under a negotiated, bona fide collective bargaining agreement that governs the employment conditions of the employee that has obtained free care. In addition, a surcharge will not be imposed for free care obtained by an employee who the employer is allowed to exclude from participation in the §125 cafeteria plan under the Connector’s cafeteria plan regulations. The surcharge will only be assessed to the extent that, “State-funded employees” obtain free care. A “State-funded employee” is an employee or dependent of an employee with more than three free care (State-funded) admissions or visits during the state’s fiscal year (October 1 to September 30) or is an employee or dependent of an employee of an employer whose employees or dependents make five or more free care admissions or visits during the same period. The actual amount of the surcharge is a percentage of State-funded free care costs based on categories of employers determined by their number of employees. Employer Category 1 are those with 11 to 25 employees; Category 2 is employers with 26 to 50 employees; and Category 3 is employers with more than 50 employees. The emergency regulation contains a table of different surcharge percentages based on the total amount of State-funded costs for the fiscal year and the category of the employer. For example, if the state’s free care cost for the period were $75,000, an employer with 27 employees would be assessed a surcharge of 50 percent of those costs or $37,500. The surcharge amount derived from the table will be reduced by the percentage of full-time employees enrolled in the employer’s health plan. However, this reduction cannot exceed 75 percent. The DHCFP will notify employers subject to the surcharge at the end of each fiscal year. The notice will contain specific information, including how the surcharge amount was determined. Employers can challenge a determination, but only on the basis that the employer was not a Non-Providing Employer, or that the employee involved was not an employee of the employer or a dependent. An appeal process is set out in the emergency regulation. Penalties for nonpayment or late payment by an employer include interest on the unpaid liability at a rate of 18 percent annually and late fees or penalties at a rate not to exceed 5 percent per month. (To return to the list of developments at the top of this Capital Checkup, click here.)
Health Insurance Responsibility Disclosure (HIRD) Requirements and Other Disclosures Effective July 1, 2007, Massachusetts employers with 11 or more full-time equivalent employees must file information each year with the DHCFP about the health insurance that they offer to their employees.14 Emergency regulations issued on June 20, 2007 specify the type of information employers are required to report.15 There will be no separate Employer HIRD form. Instead, employers will be required to submit HIRD information together with their fair share contribution filing to the Division of Unemployment Insurance in a single on-line filing. Employer HIRD information must be filed by November 15, 2007 (based on information available through July 1, 2007). Information on the filing will be forthcoming in the near future. Employers must also provide and collect an Employee (HIRD) form from employees who decline employer health coverage or decline to use the employer’s §125 cafeteria plan. Employers are required to collect signed forms 30 days after the close of the applicable open enrollment period for the employer’s health insurance or cafeteria plan or by September 30 of the reporting year, whichever is earlier. Employees who terminate participation in the plan must sign an Employee HIRD form no later than 30 days of their date participation in the plan ended. In addition to collecting the signed Employee HIRD forms by this due date, employers must also:
An employer that knowingly falsifies or fails to file any information required by the DHCFP can be assessed a fine of not less than $1,000 or more than $5,000. Employers and sponsors of employment-sponsored health coverage must also provide an annual written statement to covered individuals by January 31 of each year concerning their health coverage. In addition, a separate report must be provided to the Commissioner of Revenue that verifies that written statements were provided to covered individuals. The specific content of the written statement and the report will be developed by the Commissioner of Revenue. (To return to the list of developments at the top of this Capital Checkup, click here.)
Under Massachusetts health care reform, the age at which dependents must be covered under their parents’ insured group health plans is extended to the earlier of two years following a child’s loss of dependent status under the IRC or through age 25. Segal’s February 22, 2007 Capital Checkup has more information regarding the Massachusetts dependent coverage extension for insured plans.2 (To return to the list of developments at the top of this Capital Checkup, click here.)
Insured Plan Non-Discrimination Requirement The Massachusetts Health Care Reform Act also sets forth new non-discrimination requirements for health insurance carriers and managed care organizations. As a result, employers with fully-insured plans will be impacted by these requirements effective July 1, 2007. Further guidance from the Department of Insurance (DOI) was issued in Bulletin 2007-04 on April 6, 2007. That guidance made it clear that a health insurance carrier can only enter into health benefit plan contracts with employers that do not discriminate against lower paid full-time employees living in Massachusetts. It also clarified that although the non-discrimination requirements apply to all insured group health plan contracts that are entered into with employers on or after July 1, 2007, carriers’ contracts executed prior to July 1, 2007 (or that go into effect on or after that date) are not subject to this rule until the next renewal. (To return to the list of developments at the top of this Capital Checkup, click here.)
MA Health Care Reform Compliance Chart The table below depicts the various requirements mandated by the Massachusetts Health Care Reform Act, as amended, including the responsible parties, effective dates and the status of any guidance issued as of the date of this Capital Checkup:
Finally, The Connector has issued an “Employer Handbook" designed to highlight the key issues regarding health care reform for employers and assist them in understanding their obligations.16 (To return to the list of developments at the top of this Capital Checkup, click here.)
As with all matters involving the interpretation or application of laws and regulations, clients should rely on their attorneys for authoritative advice regarding Massachusetts Health Care Reform. Segal can be retained to work with plan sponsors and their attorneys on reviewing and editing plan designs, including descriptions of plan benefits, plan coverage and eligibility rules, and cafeteria plans, to ensure compliance with this comprehensive and dynamic state health care initiative.
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
print this page
