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Mass. health care reform rules begin to take shape

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BOSTON--Massachusetts regulators have taken several steps to help employers and state residents comply with the Bay State's landmark health care reform law.

Recent actions taken by officials of the Commonwealth Health Care Connector, the agency implementing key portions of the 2006 law intended to achieve near-universal health care within a few years, include:

c Finalizing a health insurance premium affordability schedule. If premiums of available health insurance plans are above a certain amount and an individual's income is below a certain floor, state residents are exempt from the law's requirement that all residents have coverage or pay fines.

c Making available a form that employers must distribute to employees who decline either employer-provided coverage or a so-called Section 125 plan in which employees pay the full premium through salary reduction. Employees must sign the form and employers are required to keep the forms for three years.

c Setting in motion a system allowing employers to electronically send information to the Connector to enable employees who are not eligible for company-provided coverage, such as part-time workers, to obtain coverage through the Connector by making pretax contributions.

c Temporarily waiving a requirement that employers file Section 125 plan documents with the state.

Benefit experts question whether the Section 125 plan filing requirement is necessary at all, saying it is unlikely regulators would ever read the documents.

"What would they ever have done with the forms?" asked Randy Abbott, a senior consultant with Watson Wyatt Worldwide in Wellesley Hills, Mass.

A Connector spokesman said a legislative change is being sought so that the Section 125 plan filing requirement would not--as is the case now--apply to nearly all employers with at least 11 full-time employees in the state.

Despite the recent moves, employers are waiting for additional guidance. The Connector, for example, has not yet published a form detailing other information employers will have to report to the state. Information to be reported on that form--the Employer Health Insurance Responsibility Disclosure--includes what percentage of health insurance premiums employers pay and if a Section 125 plan is offered. It isn't known when that form, which employers are supposed to file with the state by Nov. 15, will be available.

While the new guidance and forms are welcome, "the game isn't over yet," said Andy Anderson, of counsel with Morgan, Lewis & Bockius L.L.P. in Chicago.

Even so, "Employers have a lot more guidance than they did a month ago," said Amy Bergner, a principal and attorney with Mercer Human Resource Consulting in Washington.

Perhaps the biggest unknown is how close the state will come in achieving universal coverage. Prior to the enactment of the law, well over 300,000 state residents lacked health insurance coverage.

Since then, about 80,000 uninsured residents have obtained coverage through Commonwealth Care, a state program that subsidizes--or in some cases pays the entire--health insurance premiums for lower-income residents. Another 50,000 residents have obtained coverage through an expansion of the state's Medicaid program.

In addition, the state recently made available a program called Commonwealth Choice, which provides access to coverage for residents not eligible for employer coverage. While the state does not subsidize the program, the premiums charged often are substantially lower than those available in the non-group market.

Still, it could be some time before it is known how many of the roughly 160,000 residents eligible for Commonwealth Choice buy the coverage. Stiff financial penalties for not having coverage don 't kick until next year.

Also unknown is whether the law will be challenged on the grounds that it runs afoul of Employee Retirement Income Security Act, which pre-empts state laws and rules that relate to employee benefit plans.

"I'm surprised no one has challenged it yet," said Rich Stover, a principal with Buck Consultants L.L.C. in Secaucus, N.J., noting that if other states enact reform measures, multistate employers could face significant administrative burdens in complying with different state requirements, which is something ERISA pre-emption was supposed to prevent.