1. Massachusetts Health Care Reform Mandates
Massachusetts Taxpayers Foundation
Massachusetts Health Care Reform Mandates
August 3, 2006

2. New Mandates
Adult residents of Massachusetts must obtain and maintain ‘creditable’ health insurance coverage
Employers with 11 or more employees must offer a Section 125 plan

3. The Individual Mandate
The individual mandate will directly affect approximately 500,000 uninsured in MA
Paths to coverage (in order of priority):
Eligible for Medicaid
Eligible for employer’s plan
Eligible for subsidized coverage; plans will be purchased through the Connector
If ineligible for any other coverage, can purchase directly through the Connector

4. Effectiveness
Only an individual mandate will get us close to universal coverage
The employer-based system provides nearly 80% of all non-elderly insurance in MA at a cost of around $10 billion; however it doesn’t cover everyone:
30% of the uninsured are unemployed
25% of the working uninsured declined an employer offer
25% of the working uninsured weren’t eligible for their employer’s plan

5. Correcting Perverse Incentives
The low income uninsured in MA currently receive free medical care from the state
Employees are turning down subsidized coverage from their employers in order to utilize free services
People voluntarily buy insurance when the benefits outweigh the costs
Reducing the costs of insurance will increase the number of individuals with coverage
Conversely, increases in the cost of health insurance are pricing the healthy out of the market; the fastest growing group of the uninsured are those earning over $50,000

6. The Employer Mandate
The requirement to offer a Section 125 plan will directly affect approximately 60,000 MA employers; 92% of these already provide health coverage
The requirement directly supports the individual mandate by increasing access and affordability
A Section 125 plan can receive a 100% employee contribution, but it allows the employee to buy with pre-tax dollars making insurance more affordable
The Section 125 mandate is not a requirement for employers to contribute to health coverage

7. Effectiveness
The Section 125 requirement will reach those members of the workforce, such as part-time employees, who are often not eligible for an employer-sponsored health plan
The pre-tax benefit can reduce the costs of purchasing insurance by percent; if the employer passes on their savings, this can be as much as percent of the premium cost
The Section 125 plan will allow health insurance to be portable among small employers, encouraging continuity of coverage

8. Correcting Perverse Incentives
Current underwriting rules that stipulate minimum contributions and minimum participation rates create an ‘all-or-nothing’ situation for employers
A Section 125 plan offers the same tax benefits to an employer providing either health insurance or wages to be used for insurance – this encourages a defined contribution model
Once individuals can access the discounted rates businesses were paying, individuals can choose the product best suited to their needs and are likely to be a better purchaser of their health insurance than their employer

9. Additional Employer Responsibilities
Fair Share Assessment
Free Rider Surcharge and reporting requirement