The new year brings with it mixed financial news for Massachusetts employers, with $200 million in new healthcare assessments and unemployment insurance rate relief both taking effect.
The changes, effective Jan. 1, are part of a plan Gov. Charlie Baker proposed last summer in an effort to get a handle on the rising costs of MassHealth, the $16 billion Medicaid program that makes up the largest expenditure in the roughly $40 billion state budget and crowds out other spending priorities.
Baker in August signed a law temporarily boosting a fee known as the Employer Medical Assistance Contribution, which is paid quarterly by employers with six or more workers. The same law established a new payment for employers whose workers are enrolled in public health insurance and included a change in unemployment insurance rates to mitigate the costs for businesses.
Under the new law, the maximum per-employee annual rate for the employer contribution will rise from $51 to $77, generating $75 million per year, according to the Associated Industries of Massachusetts.
That same group of employers — those with at least six workers — will also need to pay up to a maximum of $750 per employee for any non-disabled employee enrolled in MassHealth or subsidized coverage through the Massachusetts Health Connector. This payment would generate an estimated $125 million this fiscal year, according to AIM.
Though the payments are based on wages paid beginning this week, employers won’t receive their first bill until April. To defray the added costs, previously scheduled rate hikes for unemployment insurance in 2018 and 2019 were slowed so that employers will now pay a total of $334 million less than they otherwise would, according to AIM.
The new healthcare payments are scheduled to end after 2019 and “will help to offset the costs for employees on subsidized coverage while longer-term reforms are established and implemented,” according to a Baker administration fact sheet.
“In recent years, Massachusetts has seen an increase in health coverage from employer-sponsored insurance to publicly-subsidized coverage, increasing the costs to taxpayers,” reads the fact sheet from the Department of Unemployment Assistance. “The shift from commercial coverage to public coverage has contributed to significant growth in MassHealth spending.”
The rate of commercial coverage in Massachusetts has declined by more than 450,000 people since 2011, while MassHealth enrollment grew by over 500,000 individuals during the same time period, according to the administration.
To account for increased spending at MassHealth, Baker’s original fiscal 2018 budget plan, filed last January, sought to impose a $2,000 per employee assessment on companies with 11 or more employees that either do not offer health coverage or do not insure at least 80 percent of their full-time employees. Business groups balked at that idea, saying it would penalize companies that offered insurance their employees chose not to take.
In June, as a conference committee worked to develop the final version of this fiscal year’s budget, Baker submitted to them an alternative plan worth $315 million in savings and revenues, packaging a series of MassHealth reforms, including eligibility changes, with the employer assessments and unemployment rate modifications.
Saying they lacked time to vet the governor’s recommendations, lawmakers left the reforms out of the budget they passed, but included the fees, which Baker returned to them. He called on the Legislature to hold a hearing on his proposal and act on it within 60 days.
“These reforms are necessary to prevent an unfair burden on Massachusetts employers and health care providers,” Baker said at the time, warning that “corrective action” would be needed otherwise to make up for the revenues and savings he said his plan would generate.
Ultimately, lawmakers in late July rejected Baker’s MassHealth reforms, opting to forge their own path on cost control. Five months later, what direction that path will take remains unclear.
The Senate in November passed a sweeping healthcare bill that, rather than focusing specifically on MassHealth, addresses the system more broadly, including elements aimed at reducing hospital readmissions, raising the rates paid to community hospitals and cutting down on unexpected consumer costs.
Though Baker said the bill “doesn’t save the state any money,” Senate Ways and Means Chairwoman Karen Spilka has said it could yield $114 million in savings from MassHealth reforms and $475 million to $525 million from its commercial market reforms by 2020.
Few details have emerged so far about how the House plans to tackle health care. Rep. Peter Kocot, who was named co-chair of the Health Care Financing Committee in July, has said he hopes to have a bill ready in early 2018.
A November report from the Department of Unemployment Assistance projected employer contributions for unemployment insurance would total $1.362 billion in 2017 and $1.515 billion in 2018. In May, before the switch to the smaller increase, the department estimated that employer contributions would total $1.924 billion in 2018.