January 18, 2017

As Obamacare repeal looms, Baker sees new fee, rate caps as best medicine for skyrocketing state health costs

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State House News Service

Gov. Charlie Baker

“The unintended consequences of Massachusetts’ compliance with the Affordable Care Act are forcing taxpayers to cover the cost of a growing number of employed individuals’ health care.” — Baker spokesman

Companies that do not offer their employees health insurance would pay a $2,000 annual assessment per full-time worker to the state under a plan Gov. Charlie Baker intends to offer later this month to blunt the impact of escalating, enrollment-driven costs in the state’s Medicaid program, State House News Service has learned.

The proposal — the bulk of which is expected to be filed within the governor’s budget due on Jan. 25 — would also impose growth caps on the rates health providers can charge for medical services in an effort to control the cost of care in the commercial market and make it more affordable for employers.

Both ideas come as the state is grappling with questions about how to control growth in healthcare costs in the public and private markets and as enrollment in MassHealth has reached an all-time high (a projected 1.93 million people in fiscal 2017) putting unsustainable pressure on state finances.

Provider price caps in the commercial market are also part of the administration’s plans, according to officials, as a cost control measure designed to make insurance plans more affordable for employers and employees and to discourage avoidable enrollment in MassHealth.

The employer assessment, which would bring an estimated $300 million into state coffers, represents a revival of the so-called fair share contribution plan that was a linchpin of the 2006 universal health care law in Massachusetts before it was repealed to make way for the federal Affordable Care Act.

The details of Baker’s multi-part plan to address the costs that come with surging enrollment in MassHealth despite low unemployment, population growth and the highest rate of insured residents in the country were laid out in an internal policy planning document obtained by State House News Service. The contents of the 15-page document were subsequently confirmed by the administration.

Wikimedia Commons/Hsin Ju HSU

Massachusetts State House

The state employer mandate was repealed in 2013 as lawmakers and former Gov. Deval Patrick worked to bring Massachusetts into compliance with the Affordable Care Act, and a parallel federal mandate that would have fined employers with more than 50 employees that did not offer insurance has never gone into effect.

The expansion of insurance subsidies under the ACA has also led to an increase in full-time workers choosing MassHealth over employer-sponsored coverage.

“The unintended consequences of Massachusetts’ compliance with the Affordable Care Act are forcing taxpayers to cover the cost of a growing number of employed individuals’ health care as these workers increasingly move to the publicly subsidized healthcare system,” said Tim Buckley, senior advisor to Baker, in a statement.

“To protect taxpayers from this growing problem, the administration is proposing reforms aimed at maintaining MassHealth’s sustainability, addressing the affordability of health care, and increasing the state’s flexibility in ACA implementation, while also reducing administrative burdens on employers, and reintroducing an employer contribution requirement for employers with over 10 employees.”

MassHealth, the state’s Medicaid program providing subsidized health care coverage to low-income residents, is projected to grow by $1.25 billion in fiscal 2018 with a net increase of $563 million for the state without reforms, according to the documents. The Baker administration attributes $600 million in increased costs to enrollment growth.

Baker, in a letter to Congress last week, said that since 2012 the number of residents insured through commercial coverage has declined 7 percent, while MassHealth enrollment has increased at the same rate.

The trend, according to officials, can be explained in part by expanded eligibility under the ACA and the absence of penalties on companies that don’t offer insurance that has led to employees either choosing MassHealth over employer-sponsored plans or not being offered coverage through their workplace at all.

Antonio Caban / State House News Service

Gov. Charlie Baker, left, listens as Marylou Sudders, state health secretary, speaks at a press conference on plans to fight the opioid epidemic.

Health and Human Services Secretary Marylou Sudders and Administration and Finance Secretary Kristen Lepore said the combined effort to control costs for employers, impose a new assessment, improve internal controls and seek greater flexibility from the federal government would hold the net growth in MassHealth expenses after federal reimbursement to roughly 2 percent in the coming fiscal year.

The package of insurance market reforms would also impose a moratorium on new coverage mandates and the elimination of vision and non-emergency transportation benefits, excluding mental health and substance abuse disorders, for members of MassHealth CarePlus program. CarePlus is a program covering the population that became newly eligible for subsidized insurance under Obamacare.

The administration had considered eliminating dental coverage within CarePlus, according to the document, but Sudders and Lepore said the final benefit changes would not impact dental coverage.

Before the ACA took effect, Massachusetts employers were required to offer health coverage to full-time workers and any employer with 11 or more workers that failed to comply had to pay a $295 fee per worker. Employees offered qualifying health coverage through their jobs were also made ineligible for MassHealth, but that restriction changed under the ACA allowing full-time workers to choose MassHealth over employer-sponsored coverage.

Baker’s plan would impose a $2,000 fee for all full-time workers — defined as someone who works 35 hours or more — for the same sized businesses, offsetting about half the average cost of insuring someone through Medicaid. The fines would apply to business that don’t cover at least 80 percent of their workers and share at least 60 percent of the premium cost with employees.

The plan differs from the Affordable Care Act that called for fines to be assessed on companies with more than 50 employees. The federal employer mandate, however, was delayed several times and though it is due to take effect in 2017, according to the IRS, Congress’s interest in repealing the ACA and the lack of progress toward implementing the fees have led to doubts about its future, Sudders and Lepore said.

Both Cabinet officials said the administration would not “double assess” companies if the ACA fines remained in place and took effect, and another senior administration official said the governor might be willing to unwind the assessments if the federal government gives Massachusetts greater flexibility to control MassHealth.

“By implementing these reforms, taxpayers would no longer be forced to pick up the cost of more and more employed individuals’ healthcare and the Commonwealth would bring back key elements of the original, bipartisan Massachusetts health law passed years ago,” Buckley said.

To make insurance more affordable for companies, Baker intends to seek a waiver from what the administration sees as onerous reporting requirements under the ACA employer mandate and impose provider price caps on the delivery of health care services.

The administration may also seek waivers from ACA-mandated rating factors and other provisions depending on what reforms the Republican-led Congress adopts.

The price cap policy proposal, which is still being developed, would exclude primary care and behavioral health, Sudders said. The cap levels would most likely be set by the Division of Insurance (DOI) through regulations, and provider rates would have to be approved by DOI.

The administration also wants to eliminate facility fees charged by providers for satellite clinics and outpatient care, make it easier for small businesses to shop through the Connector and empower the Center for Health Information and Analysis to post rates for common procedures on its website for easy comparison by consumers.

College students not covered by their parents’ insurance would also be required to join the plan offered through their university rather than enroll in MassHealth, and the state would pay the difference.

The idea of price caps is one that has come up in the work of a special commission led by Rep. Jeffrey Sanchez and Sen. Jamie Welch on cost containment. House Majority Leader Ron Mariano, a member of the provider price variation commission, said in November that he sensed little support for a return to rate setting, but left the door open to caps.

“The use of rate caps as it applies to a percentage of Medicaid may be something you could look at as a short-term solution to close the gap so there is an opportunity to maybe take a look at that and see if it fits what we’re trying to do,” Mariano said.

Most of the policy changes will be filed by Baker as outside sections to his fiscal 2018 budget proposal, which must then be vetted by House and Senate lawmakers over the coming months, according to a senior administration official, who said there may also be standalone bills related to the reforms.

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