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A Massachusetts health reform law board Thursday formally repealed regulations to a landmark state statute that required employers to either offer health care coverage to their employees or pay a fine.
The unanimous vote by the board of directors of the Massachusetts Health Connector, which regulates key provisions of the state's 2006 health reform law, brings to a final end a provision in that law that required employers with at least 11 full-time employees to either offer coverage or pay an annual $295-per-employee fine.
The catalyst for the board action was legislation Massachusetts lawmakers passed last year that formally repealed the mandate, known as the Employer Fair Share Contribution program.
“Given the repeal of the underlying statutes, the Health Connector's accompanying regulations no longer have legal force. For these reasons, we are proposing to repeal the regulations to minimize any confusion about their legal effect,” stated a background paper prepared for Health Connector directors prior to the vote.
Massachusetts Gov. Deval Patrick had sought repeal of the mandate, saying that it was no longer necessary to have such a requirement because of the subsequent passage of federal health care reform legislation.
Under the Patient Protection and Affordable Care Act and subsequent regulations, the federal employer mandate will go into effect in two stages.
Next year, employers with at least 100 full-time employees will have to offer coverage to at least 70% of their full-time employees or pay an annual $2,000-per-employee penalty. In calculating the penalty, an employer can exclude 80 of its full-time employees in 2015.
Then in 2016, the mandate will apply to employers with at least 50 full-time employees, with the 80-employee exclusion in calculating the penalty for not offering coverage permanently dropping to 30 employees.
Aside from repealing the Fair Share contribution, the Massachusetts board also voted to repeal rules that required employers to provide access to so-called Section 125 plans to employees who work at least 64 hours a month.
In a Section 125 plan, employees pay for health care premiums with pretax dollars.
The requirement was intended to address situations in which employees not eligible for group coverage could use those pretax contributions to buy individual policies through Massachusetts' health insurance exchange.
However, guidance issued in 2013 by the U.S. Department of Labor and the Internal Revenue Service made clear that the health care reform law, effective in 2014, bars employers from offering Section 125 plans to employees to purchase non-group health insurance without an employer contribution.
In certain ways, the broader Massachusetts law was a model for the subsequent federal health care reform law, such as making state premium subsidies available to the lower-income uninsured to purchase coverage through a state health insurance exchange.
Its 2006 law is a key reason Massachusetts has had over the last few years the lowest uninsured rate — 4.1%, in 2012, according to the U.S. Census Bureau — of any U.S. state.