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Mass Health Care Reform Act Educational Series – Employer Responsibility - (Issue 1)

Type :Health Care Reform

Employer Responsibility Under the Massachusetts Health Care Reform Act



The goal of Massachusetts Health Care Reform (HCR) is to extend health insurance coverage to as many Massachusetts residents as possible, by providing easy access to plans for both individuals and businesses. What exactly are the employer requirements under HCR? Telamon is here to help you navigate and make sense of the new reform legislation.


In the first of five emails in our educational series, we will be updating you on employer requirements under HCR. While the new law does not require employers to offer employer-sponsored insurance, it does impose liabilities for employers with 11 or more full-time employees who do not make a "fair and reasonable" premium contribution. New requirements for employers include:

  • All Massachusetts employers with more than 10 MA-based employees (full or part-time) must adopt and maintain a Section 125 plan by July 1, 2007. This is a cost-effective way for employers to offer their employees a pre-tax means to buy insurance. Failure to offer a Section 125 payroll deduction option to all their employees may result in a Free Rider Surcharge if their employees or dependents significantly utilize the state’s Uncompensated Care Pool. Employers with 10 or fewer employees are not required to establish Section 125 plans, but they may if they choose. Click here to read how the Commonwealth calculates number of employees.

  • For employers with 11 or more full-time MA-based employees, who do not offer health insurance, they must make a “fair and reasonable premium contribution” toward health insurance for employees. If they fail this “fair and reasonable contribution” test, they will be subject to the Employer Fair Share Contribution of $295 per employee per year. We will be covering this topic in much more detail in the second installment of our educational series.

  • Employers with 11 or more employees must file an annual Health Insurance Responsibility Disclosure (HIRD) Form with the Division of Health Care Finance and Policy. The Commonwealth Connector is currently in the process of finalizing the employer version of the form. We will provide updates as they become available.

    It is important to note that, except for new reporting requirements, HCR will have a limited effect on the majority of MA-based employers, as most currently provide health insurance to their employees through a Section 125 plan, or fall below the cut-off of 11 employees.
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    Section 125 plans (also called cafeteria plans or flexible spending plans) give employers the opportunity to gain from tax advantages that will significantly enhance their current benefits plans. These plans save employers FICA taxes that will generally offset any administrative cost of setup. At the same time, a Section125 plan allows employees to pay for health insurance coverage on a tax-free basis; their contribution is not subject to state and federal taxes or federal FICA withholdings taxes, thereby offsetting the cost of health insurance anywhere from 15% to 50%. For ease of reporting purposes, many companies are considering setting up a separate Section 125 plan for their uninsured employees. If you’d like to learn more about Section 125 plans, Telamon can help. Click here to learn how Section 125 plans can provide both employers and employees with significant financial benefits.

    The Free Rider Surcharge (also referred to as the Employer Surcharge for State Funded Health Costs) kicks in if an employer with more than 10 (full or part-time) employees fails to offer a Section 125 plan and:
    Click here to read how the Commonwealth calculates number of employees.

    Coming up next: Financial Commitment of Employers under the Massachusetts Health Care Reform Act. In the next installment of our special educational series, we will discuss the Employer Fair Share Contribution and provide information around what is considered a “fair and reasonable premium contribution”.

    If you do not currently subscribe to Telamon’s education series, it’s not too late. Click here if you would like to continue receiving these emails. If you would like to forward this to a colleague or peer who might benefit from this educational series, click on here.

     

     

  • An employee or dependent receives free care with more than three state-funded hospital admissions or physician visits per year; or
  • The company has five or more instances of employees or dependents receiving free care in a year

    In the first year, the surcharge will range from 10% to 55% of the cost of free care for employees, with an exemption on the first $50,000 of state-funded cost per employer.

    Telamon's staff has years of health care experience and is continually on top of the Health Care Reform Act and how it will affect our clients. To learn more about our team of health care experts, click here.

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