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Massachusetts Health Reform. ERISA Industry Committee July 31, 2007. The Uninsured in Massachusetts. Total Commonwealth Population: . 6,200,000. Insured (94%). 5,830,000. Uninsured (6%) summer 2006. 370,000. <100% FPL. 70,000 . Medicaid Eligible but unenrolled. 0-300% FPL. 140,000 .

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massachusetts health reform

Massachusetts Health Reform

ERISA Industry Committee

July 31, 2007

the uninsured in massachusetts
The Uninsured in Massachusetts
  • Total Commonwealth Population:


  • Insured (94%)


  • Uninsured (6%) summer 2006


  • <100% FPL
  • 70,000
  • Medicaid Eligible but unenrolled
  • 0-300% FPL
  • 140,000
  • Commonwealth Care
  • >300 FPL
  • 160,000
  • Affordable Private Insurance

Note: Based on August 2006 Division of Health Care Finance and Policy statewide survey

ma landmark health care reform law
MA Landmark Health Care Reform Law
  • Government subsidies for low-income uninsured
  • Individualsage 18 and older to have health insurance by July 1, 2007
  • Employers w/ 11+ full-time equivalent employees to provide premium contribution & pre-tax payroll deduction
  • Reform the small- & non-group market
  • Increase MassHealth reimbursement levels (P4P)
health connector s mission insure as many as possible
Health Connector’s Mission: Insure as many as possible
  • Create choice of affordable insurance products
  • Consolidate administration of group insurance
  • Deliver high quality customer service
  • Keep the process simple and transparent
  • Improve the portability of health insurance
what the connector does

Commonwealth Care benefits & premiums

MCC Regulation

S. 125 Regulations

Affordability Schedule

Waivers & Appeals


Qualify & enroll for CommCare

Seal of Approval for CommChoice

Sell CommChoice:


Non-group employees

Small employers

What the Connector Does
employer responsibilities
Employer Responsibilities
  • Section 125 Plan Offering
  • Fair & Reasonable Employer Contribution
    • Employers may choose to make contributions to their employees’ health insurance or to make payments that ultimately help offset the State’s healthcare costs
  • Health Insurance Responsibility Disclosure (HIRD) Form
  • Non-discrimination Provisions
helping employees connect to good health

Young Adults


(Section 125)

Other Non-Group

Small Business

Helping Employees Connect to Good Health


options under commonwealth choice 37 year old



Carrier A

Carrier B

Carrier C

Carrier D
















Options Under Commonwealth Choice(37-year old)
how does this compare with what is available now
How Does This Compare With What is Available Now?
  • The $184 plan is half the $335 premium this same individual would pay now
  • The $335 premium currently available buys less:
      • No Rx coverage
      • $5,000 deductible
  • The $175 plan covers:
      • Rx
      • Office visits & ER visits immediately, plus 80 % of other costs after a $2,000 deductible
Minimum Creditable CoverageThe lowest level of insurance an individual may purchase to avoid the mandate.
  • Comprehensive health plans, include Rx
  • No annual or per sickness benefit maximum
  • 3. No indemnity fee schedule of benefits
  • Deductible capped at $2,000/$4,000
  • Cover (3/6) preventive care visits
  • Out-of-pocket max. of $5,000/$10,000
individual mandate
Individual Mandate
  • Tax Year 2007: MA residents age 18 and older without minimum creditable coverage will lose the personal exemption unless they have an approved waiver (e.g. based on affordability, hardship)
  • Tax Year 2008 and later: Penalty will be 50% of what an individual would have paid toward “affordable” health insurance coverage for one year
affordability schedule and regulations
Affordability Schedule and Regulations
  • Flexible enforcement
    • Accounting for individual circumstances
    • Robust appeals process
  • Require Participation in Commonwealth Care
  • For the rest, keep it simple
    • Excuse lower-income brackets
    • Assume affordability for upper-income brackets
    • Progressive sliding scale of premium contributions, stated as dollars/month, in between for singles, couples and 3+
  • Benchmark affordability for ESI based on Commonwealth Care rates
commonwealth choice overview
Commonwealth Choice Overview
  • Not subsidized
  • Individuals who earn more than 300% of FPL
  • Options from six insurers have earned the Health Connector’s Seal of Approval
  • GOLD, SILVER, BRONZE and YOUNG ADULT Commonwealth Choice plans are available:
    • Via a Section 125/Voluntary Plan (pre-tax)
    • Direct (after tax)
  • Pharmacy options available
  • Available to small businesses (<50 employees) on “contributing” basis in the future
commonwealth choice eligibility
Commonwealth Choice Eligibility

Residents of Massachusetts age 18 or older (or under 18 with the

permission of a parent/guardian) living within the health plan’s service area who

  • Participate in an employer’s Section 125/Voluntary Plan, OR
  • Work for an employer with ≤50 employees but do not participate in the employer’s Section 125/Voluntary Plan; OR
  • Work for an employer with >50 employees but do not participate in the employer’s Section 125/Voluntary Plan, and
      • are not eligible for employer sponsored insurance; or
      • are within a waiting period for employer sponsored insurance; or
      • are eligible for employer sponsored insurance, but do not receive an employer contribution of at least 33% toward the cost of the employee health insurance (individual coverage); or
      • are eligible for employer sponsored insurance, but the health insurance offered by the employer does not meet minimum creditable coverage standards
the commonwealth choice advantage
The Commonwealth Choice Advantage
  • Aggregates options available from six quality insurers (e.g. Travelocity)
  • Options comply with minimum creditable coverage (MCC) requirements
  • Employee enrollment is easy
  • Eligibility, billing and premium payment processes are streamlined for the employer
key dates for section 125 voluntary plan implementation
Key Dates for Section 125/Voluntary Plan Implementation
  • A Section 125 Plan must be established by July 1, 2007 that provides access to one or more health coverage options on a pre-tax basis
  • Allowable Section 125 eligibility waiting periods:
    • Up to 2 months if employer does not contribute (Voluntary Plan)
    • Corresponds with health care coverage option(s) if employer contributes
  • Commonwealth Choice coverage begins on the 1st of the month following:
    • enrollment by the employee, AND
    • submission of the first full month’s premium by the employer
  • Pilot for EDI (ASCII) process targeted to begin August, 2007
starting a section 125 voluntary plan
Starting a Section 125/Voluntary Plan
  • Create a Section 125 Plan and designate Commonwealth Choice
  • Set up an account with the Health Connector, including company information and signed Terms & Conditions agreement
    • On-line, by fax or by mail
  • Submit Section 125 Plan-employee information (eligible or participating employee listing) to the Health Connector
    • On-line (data entry or Excel)
    • Piloting EDI
  • CommunicateCommonwealth Choice employer ID number to eligible employees (to “shop” and enroll)
  • Once employees enroll, receive bill for premiums due from the Health Connector based on employee selection
  • Submit monthly premium payments to the Health Connector via check, EFT, wire transfer or money order
  • Note: Commonwealth Choice health insurance coverage
  • begins on the 1st of the month following:
    • Enrollment by employee
    • Receipt of 1st month’s premium by Health Connector
  • Update Section 125 eligibility/participant information
employer account set up
Employer Account Set-up
  • Set up an account with the Health Connector, including company information and signed Terms & Conditions agreement:
    • On-line, by fax or by mail
  • Submit listing of eligible or participating employees
    • On-line (data entry or Excel)
  • At least one eligible employee must enroll within two months from the date the employer’s account is set up for the account to remain active
  • The group’s effective date is the 1st of the month following account set-up
  • Coverage begins on the 1st day of the month following enrollment and payment of 1st month’s premium and ends on the last day of the month
  • Once an employee enrolls, a bill will be generated (45 days in advance of the effective date)
      • Employees who enroll by August 15th may become effective on October 1, 2007
      • Employees who enroll between August 16 and August 31, 2007 may become effective on November 1, 2007
      • For employees who need coverage sooner, the Health Connector accepts post tax payments made directly by an individual
  • Employees who do not enroll within the enrollment period will have to wait until the employer’s next annual enrollment period (unless they have a qualified change in status event) or can purchase coverage directly through the Health Connector on a post-tax basis
billing premium payment
Billing/Premium Payment
  • Rates are calculated based on the employee’s demographics at the time of enrollment (e.g. age and zip code) and are based on the employer’s effective date
  • The Health Connector will send the employer a single bill of premium amounts due based on employee selection:
    • Once an employee makes a selection and enrolls, a bill will be generated (45 days in advance of the effective date)
    • Monthly billing statements are issued about the 15th of the month (45 days prior to the coverage month)
  • Premiums are due on the 10th of the month prior to the coverage month but may be accepted up to 5 business days prior to the beginning of the coverage month
  • The employer submits premium payments to the Health Connector via check, EFT, money order or wire transfer
billing premium payment cont
Billing/Premium Payment (cont.)
  • The employer is not responsible for any premium shortfall
  • Accounts are considered delinquent when a partial premium payment, or no payment, is received prior to the first (1st) day of the coverage month
  • If an account is delinquent for 60 days from first day of the coverage month that payment is due, coverage will be terminated
  • Any credit balances are returned to the employer after cancellation or termination of coverage
  • Re-instatement of lapsed coverage is allowed twice per plan year as long as all back premiums and reinstatement fees are paid and coverage has not lapsed for more than 90 days
changes renewals
  • Employer notifies the Health Connector of eligibility changes
  • Changes are allowed when a subscriber has an eligible status change event or moves out of the plan’s service area
  • Renewals are 12 months from the group’s effective date
  • Employees hired mid-year will renew on the group’s renewal date
  • Employees are “locked in/out” until the group’s next open enrollment period

Section 125/Voluntary Plan TimelineSample 1

Key assumptions:

  • CommChoice enrollment period and Section 125 waiting period run concurrently
  • July 1st Section 125 Plan effective date and 2 month waiting/enrollment period
  • The employer must set up an account with the Health Connector before employees can enroll, including
    • Employer information
    • Terms & Conditions
    • Employee census
  • During waiting/enrollment period employees can shop for/enroll in Commonwealth Choice
  • 1st Commonwealth Choice effective date is October 1st
  • 1st notification to employer of payroll deduction amounts is August 15th
  • 1st premium payment from the employer to the Health Connector is September 10th
  • Employee Commonwealth Choice coverage is effective on the 1st of the month following
    • enrollment
    • payment of the full first month’s premium
  • Employees have the option to pay the monthly premium direct (after-tax) to begin
  • coverage on September 1st or sooner

Note: The Health Connector will accept

payment up to 5 business days prior to the

benefit month.


Section 125/Voluntary Plan TimelineSample 2

Key assumptions:

  • CommChoice enrollment period is subsequent to Section 125 waiting period
  • July 1st Section 125 Plan effective date and 2 month waiting period
  • The employer must set up an account with the Health Connector before employees can enroll, including
    • Employer information
    • Terms & Conditions
    • Employee census
  • Employees can shop for/enroll in Commonwealth Choice following the 2 month waiting period
  • Commonwealth Choice enrollment period is from September 1st to September 30th
  • 1st bill (notification to employer of payroll deduction amounts) is September 15th
  • Premium payments must be received no later than 2 business days prior to the beginning of the coverage month
  • Employee Commonwealth Choice coverage is effective on the 1st of the month following
    • enrollment
    • payment of the full first month’s premium
  • 1st Commonwealth Choice effective date is December 1st.
  • Employees have the option to pay the monthly premium direct (after-tax) to begin coverage on September 1st or sooner
for more information
For more information

Contact the Health Connector:

By phone:

1-877-MA-ENROLL (623-6765)


By e-mail:

Or visit the Health Connector’s website at:

Your Connection to

Good Health

Section 125 Plan Requirements


Other Employer Responsibilities

employer responsibilities 11 ftes
Employer Responsibilities (11+ FTEs)
  • Fair & Reasonable Employer Contribution (or Fair Share Assessment)
    • Effective 10/1/06
    • Primary test based on data from 10/1/06 – 9/30/07
    • Secondary test based on coverage from 7/1/07
    • DHCFP final regulation issued 10/06
    • DUA proposed regulation issued 4/20/07
  • Section 125 Plan Offering (Free Rider Surcharge)
    • Effective 7/1/07
    • Final section 125 regulation issued 6/5/07
    • Admin Bulletin 02-07 issued 6/29/07
    • Emergency surcharge regulation/form issued 6/21/07
  • Health Insurance Responsibility Disclosure (HIRD) Forms
    • Effective 7/1/07
    • Employer HIRD filed electronically with FSC data each November
    • Emergency regulation/form issued 6/21/07
  • Annual “1099-HC” style statement
    • Effective 1/1/08
determining 11 ftes
Determining 11+ FTEs

Fair Share Contribution, HIRD and Surcharge requirements (based on payroll from 10/1/06 – 9/30/07)

Section 125 (based on payroll from 4/1/06 – 3/31/07; 10/1 thereafter)


  • Payroll hours for all who workedfor at least a month
  • Includes part-time, temporary and seasonal employees
  • 2000 hours max. for any one employee
  • Divide total hours by 2000
m g l c 151f
M.G.L. c. 151F

Section 2.  Each employer with more than 10 employees in the commonwealth shall adopt and maintain a cafeteria plan that satisfies 26 U.S.C. 125 and the rules and regulations promulgated by the connector.  A copy of such cafeteria plan shall be filed with the connector.

intent of m g l c 151f
Intent of M.G.L. c. 151F
  • Increase employer sponsored access to health insurance through cafeteria plans
  • Make it more affordable for individuals to comply with the mandate through net tax savings
  • Give employers some tax incentive as well as relief from the Free Rider surcharge
traditional cafeteria plan concepts
Traditional Cafeteria Plan Concepts
  • A Federal tax code animal – IRC §125
  • An employer sponsored plan
  • Provides choices among other employer sponsored group plans – a conduit or election vehicle. Benefit = right to make choices.
  • Does not provide any substantive benefits
  • Does not trigger ERISA compliance issues
connector section 125 regulation 956 cmr 4 00
Connector Section 125 Regulation956 CMR 4.00

Addresses use of Section 125 Plans for purposes of MA health care reform

  • Adopted March 20, 2007 as emergency regulation by Connector board
  • Public hearing held on April 27, 2007
  • Written comments submitted through 4/27
  • Final adjustments voted on at June 5 board mtg
  • Admin Bulletin 02-07 issued June 29, 2007
connector objectives for 956 cmr 4 00
Connector ObjectivesFor 956 CMR 4.00
  • Promote increased access to health insurance
  • Ease administrative burden on employer
  • Coordinate with other state agencies implementing Health Care Reform
  • Do not invite ERISA challenges
two chapters from the hcr story
Ch. 151F - §125

Increase access to health care by adopting and maintaining a plan satisfying Code §125 and Connector rules. A win/win for the employer and the employee

Ch. 118G - Surcharge

An employer who complies with 151F with respect to an employee is not subject to the Free Rider surcharge if the employee receives uncompensated care.

Two Chapters from the HCR Story
employer surcharge for state funded health costs a k a free rider surcharge
Employer Surcharge for State-Funded Health Costs (a/k/a Free Rider Surcharge)
  • May be assessed on employers > 11 employees not offering
  • §125 plans to employees receiving uncompensated care
  • HCR requires the surcharge to be assessed if more than $50,000 per year in free care used, and:
    • one employee or dependents receive free care more than three times in the year, or
    • employer has five or more instances of employees or their dependents receiving free care in the year
  • The surcharge varies by employer size and free care utilization
overview of 956 cmr 4 00
Overview of 956 CMR 4.00
  • Each employer with 11 or more FTEs at MA locations must adopt and maintain a Section 125 Cafeteria Plan, effective 7/1/07
  • Practical Effect:
    • Employers with existing Section 125 Cafeteria Plans should:
      • Amend Current Plan to Expand Eligibility, or
      • Establish Second Plan for Employees Not Covered by Group Health Plan
overview of 956 cmr 4 001
Overview of 956 CMR 4.00
  • The plan must, at minimum, be a “premium-only plan” that allows employees to pay for or contribute to the cost of medical care coverage on a pre-tax basis.
  • The plan must offer eligible employees access to one or more medical care coverage options.
    • No FSAs required
  • Employers do not need to contribute to the cost of medical care coverage options available under the plan.
  • No plan configuration restrictions
  • Special exception from 151F for employers providing noncontributory medical coverage to all employees (dependents) not otherwise excluded
overview of 956 cmr 4 002
Overview of 956 CMR 4.00
  • §125 eligibility requirements determined by the employer
  • Eligibility waiting period can match GHP wait period where employer contributes
  • Up to 2 month §125 plan eligibility waiting period permitted for employee pay all coverages
  • Optional 1-time extension to 9/1/07 for those who are employed on 7/1/07
  • Employers may exclude certain classes of employees from the plan and still be compliant for Free Rider Surcharge purposes
  • A copy of the 7/1/07 plan document must be filed with the Health Connector between 9/1/07 and 10/1/07; pending further guidance

Excludable Employees for §125 Plan Purposes:

  • Employees younger than 18
  • Temporary employees
  • 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
  • Student Employees who are employed as interns or as cooperative education student workers
  • Seasonal employees who are international workers with either a
    • U.S. J-1 student visa, or
    • U.S. H2B visa and who are also enrolled in travel health insurance
  • Employees whose employer is required to contribute to a Multiemployer Health Benefit Plan based on their employment
fair share contribution
Fair Share Contribution

Primary Test

Secondary Test

  • 33% employer
  • contribution
  • to an individual
  • health plan

25% participation


  • 25% or more of full-time employees enrolled
  • MA employer based regardless of residency
  • Based on payroll hours
  • Full-time employees
  • Employed at least 90 days

Employers who fail both tests are subject to a $295 assessment per employee per year (pro-rated for part-time employees)

fair share contribution full time employee definition
Fair Share Contribution:Full-time Employee Definition
  • 35 or more hours per week who work in MA (regardless of residence)
  • Excludes independent contractor, seasonal employees and temporary employees
    • Seasonal employee
      • Works during employer’s seasonal period
      • Employment does not exceed 16 weeks
    • Temporary employee
      • Full or part time
      • Employment doesn’t exceed 12 consecutive weeks within 1 year
    • Independent contractor
      • As defined by Mass General Law
health insurance responsibility disclosure hird
Health Insurance Responsibility Disclosure (HIRD)
  • File Employer HIRD Form
    • Filed annually (date to be announced by DHCFP)
    • Filed electronically as part of annual FSC filing
  • Maintain Employee HIRD Form
    • Signed by employees who
      • Decline employer-sponsored coverage
      • Decline use of Section 125 Plan for medical
        • New hires
        • Annual open enrollment
        • Status changes where coverage is terminated while remaining employed
    • Retain for 3 years
  • Emergency regulation/form issued by DHCFP 6/21/07
annual 1099 hc statement effective 1 1 08
Annual “1099-HC” Statement(effective 1/1/08)
  • Employers must provide or contract to provide by 1/31:
    • Annual written statement to each subscriber
    • Separate electronic report to DOR
  • Statements and reports must identify:
    • Carrier or employer
    • Covered individuals/dependents w/dates of coverage
    • Policy or group numbers
    • NO SSNs
  • Penalty = $50 per ind. / $50k max per year