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Agenda

Massachusetts’ Section 125 Requirement: Implementation and Lessons Learned Jon Kingsdale Commonwealth Health Insurance Connector Authority July 18, 2008. Agenda. Policy Objectives Overview of Massachusetts’ Section 125 Requirements Survey/Case Study Results Key Findings and Lessons Learned.

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Agenda

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  1. Massachusetts’ Section 125 Requirement: Implementation and Lessons Learned Jon KingsdaleCommonwealth Health Insurance Connector AuthorityJuly 18, 2008

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

  3. 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)

  4. Overview of MA’s 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

  5. Overview of MA’s 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

  6. Advantages of Using the Connector • Employee choice of benefits level and carriers • Ease of administration & aggregation of billing • Employer NOT positioned as endorsing any one plan • One-stop shopping for info on Reform

  7. 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

  8. 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

  9. Section 125 – MA Exclusions (cont.) • Employees covered by collectively-bargained multi-employer plans (Taft-Hartley, MEWA) • Students employed as interns or as cooperative education student workers • Employers offering 100% premium contribution • Seasonal employees (state certified) and seasonal international workers with either: • U.S. J-1 student visa, or • U.S. H2B visa and who are also enrolled in travel health insurance

  10. Section 125 – MA Exclusions Not Intuitive • These exclusions and other specifics in the regs are simply not intuitive—need to consult with employers, brokers, consultants, health & welfare fund administrators, HR lawyers, etc. • On our website for your information are hand0book, sample mailings, etc.

  11. 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 >2,800 employers -- 728 completed (25% response rate)

  12. Key Findings • After initial trepidation, most employers report positive experience (< 20 hours) • 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 • E.g.: “don’t pay taxes” better than “salary reduction”

  13. 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

  14. 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 can’t be overstated • Target employers that don’t offer ESI

  15. Lessons Learned (cont.) • Most employers can’t/won’t dedicate inordinate amount of time on non-benefits-eligible employees • May need to communicate directly with employees, e.g., other non-group enrollees • Brokers and consultants play a major role in advising employers

  16. Lessons Learned (cont.) • Simplify, simplify, simplify • It all comes down to $$

  17. Exemplary Employer: Market Basket • 14,000 employees, of whom 4,500 are MA part-timers eligible for s. 125 “V.P.” only • Started with an enrollment goal & a real plan • Interactive in-store meetings, train-the-trainers (store managers), English & Spanish, • Enrollment has grown slowly since last fall, but only to 65 subscribers today (<1.5% of eligibles)

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