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November 2008

Update on Massachusetts Health Reform

CMS Approves New Waiver

In late September, the Centers for Medicare & Medicaid Services (CMS) granted Massachusetts a three-year, $10.6 billion Medicaid waiver that will enable the state to expand its landmark health reform legislation, which was enacted in 2006.  The waiver gives Massachusetts the authority to spend about $21.2 billion on over the next three years.  This amount is $4.3 billion more than was permissible under the previous waiver agreement, which expired on June 30.  This waiver agreement preserves existing eligibility and benefit levels, along with federal matching funds for all programs.  It also enables Massachusetts to meet all of its health care obligations for fiscal year 2009.  Additionally, the agreement expands by $1 billion the authority of Governor Deval Patrick’s administration to bill for programs in the safety net care pool.  The federal government granted a number of waiver extensions during the intervening months while negotiations were taking place.[1],[2]

Minimum Creditable Coverage

Also in September, the Massachusetts Commonwealth Health Insurance Connector Authority Board voted unanimously to proceed with new minimum standards for health coverage that were first drafted in 2007.  The goal of this requirement is to ensure that all Massachusetts residents have sufficient coverage while still making the insurance affordable. In general, state-approved plans must offer coverage for prescription drugs, preventive and primary care, hospitalization, ambulatory patient services, mental health and substance abuse services, and emergency services. The new rules will also mandate that effective January 1, 2010, plans must also provide coverage for radiation and chemotherapy; maternity and newborn care; medical/surgical care; and diagnostic imaging and screening tests.  The board voted to delay until January 2010 the implementation of the new standards to give employers an opportunity to overhaul their policies.  Individuals will be responsible for making sure that their coverage meets the state’s minimum standards and will be personally assessed for a failure to comply.  The tax penalty for not obtaining coverage under the universal healthcare law in tax year 2008 ranges from $210 to $912 a year, depending on age and income.  These penalties are likely to increase in 2009, according to regulators.[3]

Employer Requirements

Currently, Massachusetts employers are required to meet a premium contribution standard by satisfying at least one of the following: contributing at least 33 percent of the cost of an employer sponsored group health plan offered to all their full-time employees or enrolling at least 25 percent of full-time employees in the employer’s health insurance plan (to which the employer must be making a financial contribution).  Starting January 1, 2009, the determination of what it means to be a contributing employer will become more stringent than it has been so far for employers with 50 or more full time equivalent employees.  Companies with more than 50 full-time equivalent employees will be required to meet both of the above tests, while companies with 50 or fewer full time employees will continue to satisfy the fair share requirement by meeting either of the two tests.[4] 

Since the health care law took effect in June 2006, approximately 440,000 Massachusetts residents have obtained coverage, with about half of them having done so through employer-sponsored programs.  Senator Edward M. Kennedy, who was actively involved in the Medicaid waiver negotiations, said in a written statement that Massachusetts has “made major progress in the program’s first two years, cutting the number of uninsured in half and increasing employer-sponsored coverage.  [The Massachusetts] experience with health reform…argues well for our debate on national health reform next year.”[5]

[1] Office of Massachusetts Governor Deval Patrick, Governor Patrick Announces $21.2 Billion Medicaid Waiver Agreement, Press Release, September 30, 2008.

[2] K. Lazar.  “ Mass. Gets $10.6 b for Healthcare Insurance,” The Boston Globe, October 1, 2008.

[3] K. Lazar.  “State Tweaks Health Insurance Rules,” The Boston Globe, October 18, 2008.

[4] Code of Massachusetts Regulations, 114.5 CMR:  Division of Health Care Finance and Policy, 114.5 CMR 16.00:  Employer Fair Share Contribution.

[5] K. Lazar.  “ Mass. Gets $10.6 b for Healthcare Insurance,” The Boston Globe, October 1, 2008.