Guest Article

(From the September 29, 2008 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

Massachusetts Seeks to Expands Its Landmark Health Care Reform Law

Under the Massachusetts health care reform initiative, which became law in April 2006, 439,000 residents of the Commonwealth have become newly insured. Slated to become effective in 2009 are provisions which will impose new minimum standards on the health insurance that Massachusetts residents are required to carry under financial penalty. The Commonwealth seeks to further expand the reform by widening the group of employers potentially subject to a "fair share contribution" to the state fund.

Minimum Creditable Coverage

Massachusetts requires that individuals age 18 and older carry health insurance or face potential loss of their state personal income tax exemption and additional penalties. Until 2009, any health coverage under an insured plan issued by a licensed insurance company authorized to transact business in Massachusetts is sufficient. However, effective January 1, 2009, the coverage must satisfy "minimum creditable coverage" standards in order to comply. Among other features, the standards will require coverage to include:

Although the minimum creditable coverage requirements have been modified in response to public comments, employers are reportedly seeking further changes to enhance the likelihood that employer-provided group health plans will pass muster and not result in covered employees being penalized for failing to carry minimum creditable coverage. A change to the rules, and possibly a delay in the imposition of fines for noncompliance, are reportedly being considered.

Fair and Reasonable Contribution

Employers of 11 or more full-time equivalent employees must pay to a state fund an annual "fair share contribution" of up to $295 per employee unless they make a "fair and reasonable" premium contribution toward their employees' health insurance. They are deemed to make a "fair and reasonable" contribution if either:

For this purpose, a full-time employee is one who works at least 35 hours per week at a Massachusetts location.

The Commonwealth has proposed to tighten this requirement effective October 1, 2008, to require that both prongs be met in order for the employer to have made a "fair and reasonable" contribution. Reportedly, private employers in the state have balked at the additional requirement, and the specter of a lawsuit challenging the validity of the law -- and whether it is preempted by ERISA -- has been raised. The Division of Health Care Finance and Policy, which proposed the change, reportedly estimates that nearly 90 percent of all companies subject to the new rule would comply. Whether the regulation will in fact be adopted effective October 1, 2008 is unclear.

The information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations. If you have any questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact: Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Mary Jones 202.378.5067, Stephen LaGarde 202.879-5608, Erinn Madden 202.572.7677, Bart Massey 202.220.2104, Mark Neilio 202.378.5046, Tom Pevarnik 202.879.5314, Sandra Rolitsky 202.220.2025, Tom Veal 312.946.2595, Deborah Walker 202.879.4955. Copyright 2008, Deloitte.