Bethesda, MD -- Massachusetts’ plan to move toward universal coverage represents an impressive political achievement, and the plan’s policy innovations offer important lessons to other states. However, the true significance of the Massachusetts experiment will become clear only after the state addresses daunting implementation challenges over the next several years.
That’s the verdict delivered by the two lead papers of a six-paper package on the Massachusetts experience published today on the Health Affairs Web site. John McDonough, executive director of the Boston-based Health Care For All, teams with three colleagues from that organization to provide a comprehensive look at the important events and key players involved in the plan’s package. John Holahan and Linda Blumberg (Urban Institute) survey the issues Massachusetts will have to address as it seeks to turn its path-breaking plan into reality. Four additional papers offer perspectives on these lead studies.
Massachusetts’ plan, passed in April 2006 as Chapter 58 of the Acts of 2006, “is a complex mix of Medicaid changes, subsidized insurance offerings, insurance market reforms, safety-net alterations, individual and employer responsibility provisions, and more,” according to McDonough and coauthors. They explain that the Massachusetts plan includes the following:
-- The Commonwealth Care Health Insurance Program. Commonwealth Care will provide subsidized health insurance coverage for uninsured adults with incomes below 300 percent of poverty ($29,400 for an individual and $60,000 for a family of four). Those below 100 percent of poverty will pay no premiums, and those at relatively higher incomes will receive income-based subsidies on a sliding scale.
-- The Insurance Connector. The Connector is an independent state authority that will serve as a marketplace for insurance offered to individuals without employer-sponsored coverage, enabling them to purchase coverage with pretax dollars. Companies with fifty or fewer employees may also purchase coverage for their employers through the Connector. In addition, the Connector will manage Commonwealth Care.
-- Individual Mandate. The law requires all adults to purchase insurance, subject to the availability of “affordable” insurance. In 2007 the penalty for violating the individual mandate will be the loss of the Massachusetts state personal income tax exemption -- about $218 for an individual and $418 for a family. In 2008 and thereafter, the penalty increases to up to half the cost of the least expensive available insurance policy. The Connector board will set the definition of “affordable” and determine what types of coverage satisfy the individual mandate.
-- Medicaid Expansion. The plan expands MassHealth, the state’s Medicaid program, to children in families with incomes up to 300 percent of poverty.
-- Employer Mandate. At a minimum, employers are required to set up a Section 125 plan for their employees. Under these plans, workers can buy insurance with pretax dollars through the Connector, even if their employer contributes nothing to the coverage. If employers with more than ten employees do not make a “fair and reasonable” contribution to their workers’ insurance coverage -- with the definition of “fair and reasonable” to be defined administratively -- they will be subject to a per worker per year assessment not to exceed $295, prorated for part-time and seasonal workers.
Holahan and Blumberg say that the Massachusetts plan “is potentially of enormous consequence.” The two authors say that the plan could bring Massachusetts economic gains from improved health with a present value of $1.5 billion dollars, but they also caution that the state faces major challenges in implementing its reform plan, including the following:
-- Affordability. “Ideally, the subsidy schedule [offered to low-income state residents] would be directly linked to the affordability standard,” so that “each family would be subsidized to an extent that would allow them to purchase coverage within the standard of affordability,” the authors say. However, “nothing in the Massachusetts legislation requires such a linkage, and revenue constraints could make doing so difficult.”
-- The Connector. “The most likely approach for insurers to offer lower-cost plans” through the Connector is by requiring “much higher out-of-pocket spending than is typical today,” say Holahan and Blumberg. They warn, however, that policies with high out-of-pocket spending could segment the Connector’s risk pool, attracting healthier enrollees and leaving only those with high medical costs in more-comprehensive policies, thus driving up premiums in these policies. On the other hand, “if such high-cost-sharing policies do not prove attractive, it is difficult to see how plans in the Connector would be able to hold down premiums,” since “the Connector as envisioned does not seem equipped to use other mechanisms to control increases in health care spending.”
-- Employer Response. Under the Massachusetts plan, large firms are not likely to drop coverage, but “allowing workers to purchase coverage on a pretax basis using Section 125 plans reduces the incentive for small employers to offer coverage to their workers independently,” the authors say.