Employee Responsibility under the Massachusetts Health Care Reform Act

Our educational series on the Massachusetts Health Care Reform (HCR) Act has been briefing you on the Commonwealth’s new health care coverage requirements for individuals, insurers, and employers. In the third installment of this series, we will discuss employee responsibility under HCR, including what constitutes creditable coverage and consequences for employees who refuse health care coverage.

All Massachusetts residents age 18 and over are required to have health insurance by July 1, 2007. This “individual mandate” requires that individuals obtain and maintain health insurance that meets minimum (or “creditable”) coverage requirements, and may include conventional insurance products as well as coverage under Medicare and Medicaid programs. Fortunately, individuals now have more access and more choice. The Commonwealth Connector was established to develop a range of plans that help individuals and small businesses (with fewer than 50 employees) select and purchase the right coverage to meet their needs. These plans are available through the Commonwealth Choice program.

The Massachusetts Department of Revenue will be enforcing the individual mandate. Individuals who cannot show proof of health insurance coverage by Dec. 31, 2007, will lose their personal income tax exemption when filing their 2007 income taxes. The 2006 personal exemption is $3,850 for an individual (or a tax savings of approximately $204). Failure to meet the requirement in 2008 will result in a fine for each month the individual does not have coverage, equal to 50% of the cost of a health insurance premium.

Exemptions from the individual mandate are available in a few limited cases, including those with specific religious beliefs, criteria-based hardships, or for whom the Connector has verified that there is no affordable coverage. Affordability standards have recently been recommended that plan to aggressively expand health insurance coverage while protecting people against financial hardship. Click here for a review of these recommendations and related income thresholds.

The Employer's Role in the Employee Mandate

If an employee refuses employer-sponsored health insurance, the employer will not be held responsible; however employers must protect themselves by proving that the employee declined coverage. Employers with more than 10 employees must collect an Employee Health Insurance Responsibility Disclosure (HIRD) Form for each employee who declines health care coverage, and retain the form for three years. Available on the Connector website, the HIRD Form requires the employee to acknowledge that they are aware of the individual mandate and the penalties associated with non-compliance.

In addition, employers with 11 or more employees must provide a Section 125 plan for their eligible and non eligible employees to pay for their health insurance premiums. Failure to do so by July 1, 2007 will subject an employer to the Fair Share Contribution. For a review of this and other employer responsibilities under HCR, click here to read Issue 2 in our educational series.

Coming up next: Timeline for Employer Compliance Under the Massachusetts Health Care Reform Act. In the fourth installment of our special educational series, we will review the timeline imposed by HCR for employers to complete required forms, implement plans and ensure adequate coverage.

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The information summarized in this email has been provided by the Commonwealth Connector. If you would like to read more about HCR and the new responsibilities imposed on individuals, visit the Commonwealth Connector website by clicking here.  Want to stay up-to-date on the Massachusetts Health Care Reform (HCR) Act? Curious about how HCR regulations will affect employers in the coming year?

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