Health Care Access Law: Frequently Asked Questions. The Individual Mandate

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1 Health Care Access Law: Frequently Asked Questions The Individual Mandate What is the individual mandate going to mean for me? How much will I have to pay? Residents of Massachusetts will be required to have health insurance by July 1, They will report coverage on their 2007 income tax forms by April 15, The mandate includes an affordability clause whereby an individual will NOT be penalized if there isn t an affordable product on the market. Each year the Board of the Connector will set an affordability scale: the percentage of income that is considered a reasonable amount for people at different income levels to contribute to their insurance. The second step in enforcing the mandate will be to determine whether there is a product available through the Connector that someone can purchase at an affordable price. If an affordable product ISN T available for someone at a given income, there are two options: 1) if the person s income is below 300% of the Federal Poverty Level (FPL), he or she will be eligible for a state subsidy if their employer has not recently offered a subsidized insurance policy. (See Commonwealth Care Health Insurance Program below); 2) if the person s income is above 300% FPL, he or she won t be penalized for not having insurance. People will be able to check with the Connector to see if affordable products are available and whether they will be subject to the mandate. If an affordable product IS available and someone doesn t purchase it or have health insurance through some other means, he or she will lose his or her personal exemption for Tax Year 2007 (roughly $180-$190). If the person still doesn t have insurance in Tax Year 2008 (beginning January 1, 2008), he or she will be fined an amount equal to half of the monthly premium for affordable insurance for each of the months he or she was uninsured. How much will my insurance cost? The price of the insurance will depend on the products insurance companies develop to sell through the Connector. Estimated prices suggest costs could be as low as $320 a month for individual policies and $640 for family policies. Are these policies going to be of good quality? The Connector will only sell policies given the Connector Seal of Approval signifying high quality and good value. All current mandates and limits on deductibles in state law and regulation will apply, with two exceptions: 1) plans will be allowed to have more limited networks (lists of covered doctors, specialists and hospitals) than currently allowed and 2) special plans for young people ages 19 to 26 may have coverage limits and cost sharing greater 1

2 than those in other policies. This is to bring the price down to a much more affordable $ range for this mostly healthy population. Will my insurance plan have really high deductibles? The law makes no change to deductibles and co-pays permissible under current law except for plans that have a Health Savings Account. These may have deductibles up to $650 more than what is currently allowed in the small business-sized insurance group. The Commonwealth Care Health Insurance Program Who will be eligible for subsidized insurance through the Commonwealth Care Health Insurance Program? Families and individuals earning up to 300% of the Federal Poverty Level (FPL) whose employers do not offer insurance and contribute a certain percentage to the premium cost will be able to apply for the Commonwealth Care Health Insurance Program. Those whose employers do already pay for health insurance may participate in the program as long as their employer maintains his or her contribution. The FPL is set each year by the federal government. For 2006, 300% of FPL is approximately $29,400 for an individual and $60,000 for a family of 4. How much will I have to pay for insurance through the Commonwealth Care Health Insurance Program? Premiums for the Commonwealth Care Health Insurance Program will be based on a sliding scale of affordability according to an individual s or family s earnings. This scale will be set in the next few months. No one in the subsidy program will have to pay a deductible and people whose incomes are at 100% FPL or below will pay neither a deductible nor a premium. People in Commonwealth Care will have small co-pays similar to those in the Medicaid program now. For the first 3 years, these policies will be provided by the four Medicaid MCOs Fallon, HealthNet, Neighborhood Health Plan and Network Health. When can I apply for Commonwealth Care Health Insurance? The Commonwealth Care Health Insurance Program should be running and processing applications by October 1, The Connector will launch a public awareness campaign in advance of this date to promote awareness of the new program and the application process. Legislators will certainly be informed of the program start and application process. I currently receive MassHealth. Will I have to sign up for a new program? Will my coverage change? No. All people who currently receive MassHealth (MA s Medicaid program) will continue to receive health coverage under the same program. You will not need to sign up for anything new. 2

3 In addition, MassHealth benefits that were cut in including dental and vision services, chiropractic and certain prosthetic devices, will be provided again through MassHealth. If I m not eligible for a subsidy what options do I have? My employer doesn t provide insurance, how will this law help me? The individual market (those who buy insurance without employer assistance) will be merged with the small group insurance market (employers of 50 or less) which should reduce premium prices for an individual by up to 28%! This will have a positive impact on an individual s ability to maintain coverage. The health care access law requires employers with more than 10 employees to offer Section 125 plans. This makes it possible for employees to buy health insurance with pre-tax wages reducing the price of health insurance by 25-30%. The Connector will make it much easier for individuals as well as small businesses find the affordable and high quality products that are on the market. Insurance plans sold through the Connector will be allowed to have more limited networks of doctors and hospitals than those allowed in other policies. This should make these policies less expensive. The law also gives state tax benefits to people who enroll in Health Savings Accounts, allowing them to pay for their premiums, co-pays, co-insurance, deductibles and any other cost-sharing amounts out of pre-tax wages. I own my own small business. How will this law help me? The Connector will make it much easier for small businesses (up to 50 employees) to offer Section 125 plans, giving their employees the advantage of purchasing insurance with pre-tax dollars. It will also take much of the work out of finding high quality and good value health insurance - the employer won t have to do extensive research and comparison shopping, the information will all be available through the Connector. Small businesses which previously had a hard time meeting minimum participation rate requirements for small group insurance policies will have an easier time getting more employees to participate, because of the Individual Mandate. Better group rates are available to firms with a higher percentage of enrolled employees. Health care coverage is related to better health status, which translates into fewer missed days of work due to personal or family illness and increased productivity. Pending Legislative override of Governor s veto 3

4 Insurance Partnership What is happening with the Insurance Partnership? The health care access law makes a couple of changes to the current Insurance Partnership program that are intended to help coordinate the program with the new Commonwealth Care Health Insurance Program. The main change is an eligibility expansion that will allow employees with incomes of up to 300% of the Federal Poverty Level (FPL) to participate in the program (currently, the limit is 200% of FPL). The requirement that participating employers contribute at least 50% of the premium cost is maintained, and "crowd-out" language limiting participation to employers who have not recently offered insurance is added to prevent costshifting by employers. Subsidies for the IP program will continue to be set on a sliding scale, but cannot be more generous than subsidies under the new Commonwealth Care Health Insurance program. What about self-employed people who are in the Insurance Partnership program? Currently, many self-employed participants in IP are receiving both employer and employee subsidies. The health reform law discontinues this practice, allowing self-employed participants to receive only the employee subsidy (the larger of the two subsidies), as of July, Selfemployed people could also enroll in the new Commonwealth Care program. The Fair Share Contribution Who has to pay the Fair Share Employer Contribution*? Two main parameters define which employers will pay the Fair Share Contribution*. First, only employers with 11 or more full-time equivalent employees will be subject to the requirement. In other words, an employer with 20 employees who all work half time would not be subject to the requirement. Second, only non-contributing employers are subject to the requirement. These are employers who do not offer insurance to their employees and do not make a fair and reasonable contribution to the premium cost. What does a fair and reasonable contribution mean? The health care reform law does not set a hard and fast requirement concerning the level of contribution required of contributing employers. Defining what constitutes a "fair and reasonable contribution" will be the responsibility of the Division of Health Care Finance and Policy; regulations setting forth the definition must be sent to the Legislature before they are implemented. Pending Legislative override of Governor s veto 4

5 How much will the Fair Share Contribution* cost employers? The Fair Share Contribution is capped at a MAXIMUM of $295 per full-time equivalent (FTE) employee, and this amount may decrease over time. The Fair Share Contribution will be determined by a formula that is intended to distribute some of the burden of free care costs to employers who don't provide health insurance. The formula takes into account various factors, including levels of free care use and the number of employees working for employers who don't provide insurance. Only employees who have worked for an employer for at least 30 days are counted for the purpose of calculating the Fair Share Contribution. The contribution is prorated for part-time employees using a standard formula that divides the annual number of hours worked by one employee by 2,000. Thus, for a part-time employee who worked 20 hours a week for 50 weeks in a year the employer would pay a contribution of $147.50, assuming that the full contribution is calculated at $295 (again, it could be lower). Do employers have to pay the Fair Share Contribution* for part-time or seasonal workers? What about contract workers? For part-time workers, employers will pay a pro-rated contribution (see above). Whether an employer pays a contribution on behalf of seasonal or contract workers will depend on further regulations promulgated by the Division of Health Care Finance and Policy as the Fair Share Contribution is implemented. Does an employer have to pay for employees* who get insurance some other way, or who decline coverage? Not necessarily. As long as an employer offers insurance and makes a fair and reasonable contribution (see above) towards the premium cost, he or she will be defined as a contributing employer and will not have to make a Fair Share Contribution, regardless of whether an employee takes the insurance. Isn't it cheaper for employers to pay the $295 than to pay for insurance? Currently there is NO penalty for not providing insurance and yet most employers do. Most employers want to offer health insurance to their employees and also know that it can be an important aspect of attracting and keeping good employees. With the Individual Mandate, employees will be even more concerned with finding jobs that offer health insurance. Free Rider What is the Free Rider Surcharge? Who has to pay it? The Free Rider Surcharge penalizes employers who do not provide insurance and whose employees get free care that is reimbursed by the Uncompensated Care Pool (UCP). Nonproviding employers those who don't provide or arrange for insurance for their employee will be subject to the surcharge if their employees get care that is billed to the UCP. Employers will 5

6 not be subject to this surcharge as long as they offer any insurance to their employees, regardless of whether they contribute to it. If an employee uses free care more than three times in a year, or if there are more than five uses of free care by all employees of an employer, then the employer will pay a surcharge of between 10% and 100% of the state's cost of that care. The first $50,000 of costs will be exempted, and the actual percent level of the surcharge will be determined by the Division of Health Care Finance and Policy. Why should an employer pay the Fair Share Contribution and the Free Rider Surcharge? Isn t that a double assessment? No, it is not a double assessment. The Fair Share Contribution is intended to level the playing field between employers who offer health insurance and those who do not. Currently employers who OFFER health insurance help pay for the cost of the free care their competitors employees receive. Employers who DO NOT OFFER health insurance pay nothing for the free care their employees use. Under the Fair Share Contribution, non-offering employers pay something toward the cost of free care, but the $295 annual assessment reflects only a portion of all free care costs borne by hospitals and the state. The Free Rider Surcharge is a penalty for employers who do not take steps to ensure that their employees have other health insurance options besides using free care. The Free Rider only applies when there are multiple uses of free care by employees of a given employer. Is the Free Care Pool going away? Free Care Pool Yes and no. The health reform legislation aims to fix and preserve the current free care system. The existing safety net for uninsured low-income residents of the state will be maintained, but the current Uncompensated Care Pool (a.k.a., Free Care Pool) will be redesigned and its management will be strengthened. Starting in October 2007, a new Health Safety Net Office within the Office of Medicaid will oversee a new Health Safety Net Trust Fund. The new office will oversee reimbursements to hospitals and community health centers for care they provide to uninsured and underinsured low income people. The new office will institute a standard fee schedule for free care payments, and will implement other management reforms that are intended to bring more transparency and accountability to the free care system. Many of these reforms respond to problems identified by the Inspector General in last fall s report on an audit of the Pool. Existing levels of funding for free care will be maintained in the coming 2007 fiscal year, with the expectation that funding may decrease as current free care users become insured. Will people who don t sign up for subsidized insurance still be able to get free care? Yes. Nothing in the law prohibits people from receiving free care if they refuse to get insurance. However, hospitals and other providers will be encouraged to sign up free care users for the new subsidized insurance program at point of service (just as they are now required to enroll patients who are eligible for Medicaid in that program). 6

7 What about the Distressed Provider earmarks in the budget? The Distressed Provider Expendable Trust, which was created three years ago, will be replaced by an Essential Community Provider Trust Fund. Funds will be distributed in the form of grants to hospitals (with priority given to safety net hospitals) and community health centers, based on criteria that are intended to target funding to the neediest providers. When it is up and running, the new Health Safety Net Office will oversee grant distributions; in FY07, the Executive Office of Health and Human Services will administer the Fund and distribute grants. Hospitals How will community hospitals be helped by the new law? Community hospitals will benefit in a number of ways. First of all, to the extent they serve patients on Medicaid, they will share in the Medicaid rate increases that are included in the law. Secondly, community hospitals will benefit from the creation of a fee-based system for making free care reimbursements an initiative long supported by community hospital groups which will make the free care system more accountable and potentially lessen the current gap between hospital payments to and from the Free Care Pool. Finally, community hospitals will also benefit as more people who now have insurance seek care in their local hospitals. How will safety net hospitals be affected? Safety net hospitals will benefit greatly from the increase in Medicaid rates included in the health reform law, and they will also benefit from the fact that many current free care users will be able to enroll in subsidized insurance programs and use that insurance to receive care in the hospitals. In addition, the health reform law contains other protections for safety net hospitals. For instance, the law maintains current free care funding levels for FY07, and it also maintains the current reimbursement system that provides guaranteed rates of reimbursement for the 16 hospitals with the highest mix of publicly funded care. The law also maintains, through the creation of a new Essential Community Provider Trust Fund, a separate reserve that will provide supplemental funding to hospitals and community health centers. Finally, in order to ensure the stability of the current safety net hospital system, the law maintains current supplemental payments for Cambridge and Boston managed care organizations that contract with these providers. Isn t the increase in Medicaid rates just a windfall for big teaching hospitals? No. Currently hospitals receive a Medicaid rate that is well below the actual cost of providing health care services to Medicaid recipients. That forces them to shift costs and increases the cost of private insurance. It also forces them to postpone necessary capital improvements, and puts pressure on them to reduce staff levels. The Medicaid rate increase in the law will help reduce these pressures. 7

8 How does this affect municipal employees? Miscellaneous While earlier versions of the Senate health care bill, as well as the Governor's proposal, all contained provisions affecting municipal health care, none of these provisions was included in the final law. How will legal immigrants be affected by this law? Most legal immigrants will be treated in the same manner as citizens. However, certain legal immigrants, including those who have lived in the United States for less than 5 years, are considered aliens with special status (AWSS), and are not eligible for Medicaid by the federal government Massachusetts has provided MassHealth (the MA Medicaid program) coverage for AWSS immigrants who are either elders or people with disabilities, at full state cost, through the budget for the past few years. This health care reform legislation places that coverage in statute. Other AWSS adults continue to remain ineligible for MassHealth. However, all legal immigrants, including AWSS, are eligible for the new Commonwealth Care Health Insurance Program, the subsidy program created in this legislation. Undocumented immigrants will continue to receive the same federally-mandated emergency health coverage currently provided. Pending Legislative override of Governor s veto 8