Mass Health Care Reform Act Educational Series - Employer Financial Commitment (Issue 2)

Financial Commitment of Employers under the Massachusetts Health Care Reform Act

In July of 2007, The Massachusetts Health Care Reform (HCR) Act goes into effect.  This reform act imposes a series of new requirements on individuals, insurers, and employers relating to health insurance coverage. In the second installment of our educational series about HRC, we will explore the financial commitment employers must keep to comply with the new reform act.

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. The Commonwealth determines “fair and reasonable” via a two-part test.

First, they determine if at least 25% of the employer's full-time equivalent employees (those who work at least 35 hours a week) are enrolled in the employer-sponsored health insurance. If the employer passes this test, they are exempt from the Fair Share Contribution.

If they do not pass this initial inquiry, the Commonwealth then determines if the employer contributes at least 33% toward the cost of an individual health plan for all of its full-time employees who are employed at least 90 days during the period of October 1, 2006 to September 30, 2007.

Employers who fail this two-part test will be subject to the Employer Fair Share Contribution of no more than $295 per full-time employee per, plus the pro rata share of $295 for part-time and seasonal employees. In addition, employers with more than 10 employees (who fail to offer a Section 125 Plan) will have an additional liability if their employees receive state-funded health services (services funded through the “free care pool”) of more than $50,000 in one hospital fiscal year. This Free Rider Surcharge will range from 10% - 55% of the state-funded cost of free care for these employees. Click here for an overview on how these assessment percentages are determined.

The Fair Share Contribution and its associated calculations.

While the fair and reasonable calculation is based on full-time employees who work at least 35 hours a week, there are a number of questions surrounding part-time, seasonal and out of state employees. The calculation tests differ slightly in these cases.
 
For example, while payroll hours of part-time employees are not included in the Fair Share calculation test, if an employer does not pass the test, s/he must pay a pro-rated amount for part-time employees. The same is true of seasonal employees (those who work not more than 16 weeks during a seasonal period). For those employees who live out-of-state, the employer must perform the Fair Share tests for all employees at Massachusetts locations, whether or not they are Massachusetts residents.Click here to review all of the frequently asked questions around the Fair Share Contribution.

Coming up next: Employee Responsibility under the Massachusetts Health Care Reform Act.

In the third installment of our special educational series, we will discuss employee responsibility under HCR, including what constitutes creditable coverage and consequences for employees who refuse health care coverage.

To take a look at our first issue on employer requirements under HCR, including the obligation of employers to adopt and maintain a Section 125 plan, click here3. If you would like to forward this to a colleague or peer who might benefit from this educational series, click on “Forward email” at the bottom of this email. If you do not currently subscribe to Telamon’s educational series and would like to continue receiving these emails, click here.

The information summarized in this email has been provided by the Commonwealth Connector. If you would like to read more about HCR and the Fair Share Contribution, visit the Commonwealth Connector website by clicking here. To view the full, final regulations on the Fair Share Contribution,click here.