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Massachusetts finalizes health assessment rule

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BOSTON—Massachusetts regulators are moving ahead to implement the state's landmark health care reform law, finalizing a key rule that determines whether employers will be subject to a special assessment mandated by the law.

Under a provision in the law, companies with at least 11 full-time employees in the state are subject to an annual assessment of up to $295 per employee if they do not provide a "fair and reasonable" health insurance premium contribution. Revenues raised by the assessment will be directed into a fund used to subsidize health insurance premiums for lower-income individuals and thus expand the number of state residents with coverage.

The final regulations, issued earlier this month by the state's Division of Health Care Finance and Policy, closely track rules the division proposed in late June. The final rules, like those proposed earlier, stipulate that if employers pass either one of two tests, they will have been considered to have made a fair and reasonable contribution and thus be exempt from the $295 assessment.

Under the primary test, if at least 25% of an employer's full-time employees are enrolled in its group health insurance plans, that employer would pass the fair and reasonable test.

If the 25% enrollment test is not met, employers that offer to pay at least 33% of the premium for individual coverage would pass the fair and reasonable test.

The availability of the secondary test, state regulators said earlier, was due to a recognition that many employers offer premium assistance to their employees, but the employees turn down the coverage and instead enroll in a spouse's or government health program.

Either test would not be difficult to meet for any large or midsize employer now offering coverage.

"It would be hard not to pass either test," said J.D. Piro, an attorney in the Norwalk, Conn., office of Hewitt Associates Inc.

Group health plan participation is typically much higher than the 25% minimum set by the final regulations. A 2005 survey by Mercer Health & Benefits L.L.C. found that, on average, about 80% of eligible employees enroll in health care plans offered by their employers.

The same survey also found that employers, on average, pay more than 75% of the premium for single coverage and about two-thirds of the premium for family coverage.

The final regulations, which answer questions employers and others raised, also provide more clarification.

For example, in determining whether an employer has at least 11 employees and therefore may be liable for the $295 fee, the final regulations make clear that all employees who work at locations in Massachusetts are to be included in employee counts, regardless of their state of residence. That was an important issue for those Massachusetts employers that have a high percentage of employees living in neighboring states.

Additionally, in running the 25% enrollment test, employers will be allowed to exclude those employees who have declined coverage because of "sincerely held" religious beliefs. In such cases, the employer would have to maintain documentation to verify that the employee claimed such an exemption.

The state division, though, did temporarily withdraw a proposed rule that would have required employers in Massachusetts to file an employee health status report annually. For each employee, the employer, among other things, would have had to report whether health insurance coverage was offered; whether the employee accepted or declined coverage; and, if coverage was accepted, whether family or individual coverage was chosen.

In the case of employers with at least 50 employees, an updated report would have to be filed quarterly, reporting any new employees and whether those individuals accepted or declined coverage.

That rule was withdrawn as the Division of Health Care Finance and Policy consults with other state agencies about ways of obtaining the information that would eliminate the risk of identity theft and duplication of data collection, said Amy Lischko, the division's commissioner.

"We have heard about some of the (reporting) burdens...and have gone back to the drawing board," Ms. Lischko said.

Hewitt's Mr. Piro said perhaps the easiest way for the state to obtain the insurance information is to add a few coverage-related questions on state income tax returns.