Massachusetts

1
Massachusetts Section 125 Requirement
Implementation and Lessons Learned Bob
CareyDirector of Planning and DevelopmentCommonw
ealth Health Insurance Connector AuthorityJune
20, 2008
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Agenda

• Policy Objectives
• Overview of Massachusetts Section 125
  Requirements
• Survey/Case Study Results
• Key Findings and Lessons Learned

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Policy Objectives

• Reduce net cost of health insurance by taking
  advantage of federal and state tax codes
• Extend pre-tax option to non-benefits-eligible
  employees (e.g., part-timers, contract workers)
• Reduce use/cost of uncompensated care pool (i.e.,
  health safety net)

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Overview of MAs Section 125 Requirement

• Applies to all Massachusetts employers with 11 or
  more full-time equivalent employees
• Premium-only plan that allows employees to pay
  health insurance premiums pre-tax
• Eligible employees must have access to at least
  one health plan
• No employer contribution required

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Overview of MAs Section 125 Requirement (cont.)

• Up to two months waiting period permitted
• Advantages to designating the Connector, but not
  a requirement
• Employers that do not offer a Sec. 125 plan
  subject to Free Rider Surcharge

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Section 125 Implementation Timeline

• April 2006 -- health reform law enacted
• Jan. 2007 -- original Section 125 effective date,
  subsequently revised to July 2007
• March 2007 -- draft 125 regulations issued
• March - May 2007 -- public comment period
• July 2007 -- regulations take effect
• September/October 2007 -- health insurance
  coverage effective date

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Section 125 MA Exclusions

• Employees under age 18
• Temporary employees (less than 12 consecutive
  weeks)
• Employees working, on average, fewer than 64
  hours per month
• Wait staff, service employees or service
  bartenders who earn, on average, less than 400
  in monthly payroll wages

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Section 125 MA Exclusions (cont.)

• Employees covered by collectively-bargained
  multi-employer health benefit plan (e.g.,
  Taft-Hartley, MEWA)
• Students employed as interns or as cooperative
  education student workers
• Seasonal employees (state certified) and seasonal
  employees who are international workers with
  either
• U.S. J-1 student visa, or
• U.S. H2B visa and who are also enrolled in travel
  health insurance

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Survey/Case Study Results

• Evaluation of initial implementation of Section
  125 plan requirement
• Six employer case studies (small, mid-sized, and
  large)
• Survey sent to gt2,800 employers -- 728 completed
  (25 response rate)

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Key Findings

• After initial trepidation, most employers report
  positive experience
• Wide variation in amount of education and
  outreach -- may affect take-up
• Jargon-free materials are a necessity for both
  employers and employees
• Tax law health benefits confusion

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Key Findings

• Frequent communication with employers is
  necessary to keep them engaged
• Administrative simplicity is crucial to success
• In a state with relatively few uninsured and very
  small non-group market, take-up rate has been
  low, so far

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Lessons Learned

• Upfront, frequent and ongoing consultations with
  employers and benefits professionals is critical
  to maintain buy-in
• Outreach and education to employers and employees
  cant be overstated
• Target employers that dont offer ESI

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Lessons Learned (cont.)

• Most employers cant/wont dedicate inordinate
  amount of time on non-benefits-eligible employees
• May need to communicate directly with employees
• Brokers and consultants play a major role in
  advising employers

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Lessons Learned (cont.)

• Simplify, simplify, simplify
• It all comes down to

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Current State of the Commonwealth

• More than 350,000 newly-insured since April 2006
• 110,000 more in private coverage (no public )
• Employer-sponsored insurance remains predominant
  source of coverage (82 of non-elderly)
• Non-group premiums are down over 40 and
  membership has grown over 50

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Current State of the Commonwealth

• Free Care Pool usage and spending down by
  one-third
• Loan repayment initiative has resulted in 47
  primary care doctors and nurse practitioners
  committing to practice in community health
  centers, providing access to primary care for
  84,000 patients
• Opinion polls show plurality of voters continue
  to support health reform