Health Care Reform Update
Implementation deadlines continue to be pushed back for health care reform employer mandates, largely at the request of the business community. Employer mandates include the Fair Share Contribution, the Section 125 cafeteria plan requirement, the so-called Free Rider Surcharge, the Health Insurance Responsibility Disclosure filing and the Non-Discrimination requirement for employer paid health insurance premiums.
Fair Share Contribution
114.5 CMR 16.00: Determination of Employer Fair Share Contribution became effective October 1, 2006. This regulation, promulgated by the Division of Health Care Finance and Policy, sets out the factors for determining whether an employer is making a fair and reasonable premium contribution to the health insurance cost of its employees. Employers with 11 or more full-time equivalent employees (as defined in the regulation) are subject to the Fair Share Contribution requirement. The definition of Full Time Employee excludes independent contractors, seasonal and temporary workers. "Full Time" means at least 35 hours per week. Employers that are not exempt from the Fair Share Contribution requirement must pay annually up to $295 per employee to the Division of Unemployment Assistance.
Two tests are used to determine whether an employer is exempt from the Fair Share Contribution. The primary test requires an employer to enroll at least 25% of eligible full-time employees in the employer’s group health plan.
Employer contributions to the premium cost of the group health plan are not required under the primary test.
If an employer offers a group health plan, but does not meet the 25% enrollment standard, it can still be exempt from the Fair Share Contribution under the secondary test if it offers to pay at least 33% of the premium cost of the group health plan.
Section 125 "Cafeteria" Plan
Effective July 1, 2007 (delayed from January 1, 2007), every Massachusetts employer with more than 10 employees is required adopt a cafeteria benefits plan that complies with 26 U.S.C. 125. The term "employee" includes all employees, not just full-time equivalents. The purpose of the Section 125 plan is to allow employees to pay health insurance premiums with pre-tax dollars.
After adoption, the Section 125 plan must be filed with the Commonwealth Health Insurance Connector by July 1, 2007. The Connector is required to adopt regulations giving guidance on the Section 125 filings, but has failed to do so, choosing to focus for the moment on reviewing and approving affordable group health plans.
The definition of "employer" excludes sole proprietorships, nonprofit entities staffed exclusively by volunteers, and certain small landlords with employees that do maintenance, construction or repair work on the landlord’s grounds or buildings.
Employer Surcharge for State-Funded Health Costs
Effective July 1, 2007 (delayed twice from an original effective date of October 1, 2006), every employer without a Section 125 Cafeteria Plan will be subject to a surcharge for state-funded health costs (the so-called "free-rider" surcharge) if the state pays health care costs above a certain level for uninsured employees of the employer.
Employers with Section 125 cafeteria plans on file with the Connector will be exempt from the free-rider surcharge.
The Division of Health Care Finance and Policy will release regulations implementing this requirement to public comment in the spring.
Health Insurance Responsibility Disclosure
Effective July 1, 2007 (also delayed twice from an original effective date of October 1, 2006), every employer with 10 or more employees will be required to file annually a Health Insurance Responsibility Disclosure ("HIRD") form with the Division of Health Care Finance and Policy. The HIRD form will require, at a minimum, information about the employer, the number of employees, the employer's group health plan (if any), and whether the employer has a Section 125 cafeteria plan.
Employees who decline to enroll in an employer sponsored group health plan will be required to file an employee HIRD form reporting that he/she declined to enroll in the employer’s health plan. The employee HIRD form must also be filed annually.
The Division of Health Care Finance and Policy will release regulations implementing this requirement to public comment in the spring.
Non-Discrimination
Effective July 1, 2007, insurers in the Commonwealth offering blanket or group health insurance plans may only sell to employers if the insurance is offered to all full-time employees. Employers must offer to cover the same premium percentage for each employee, allowing, however, greater contribution percentages for lower paid employees and separate percentages for employees with collective bargaining agreements.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.