The 2006 Massachusetts Health Reform Law requires nearly everyone to have health insurance by Dec. 31. Here are the basics of the new plan. (For the main story, click here, and read a conversation with the head of the program.)
The context
Massachusetts might be one of the easiest states in which to adopt mandatory insurance.
Surveys have shown that Massachusetts already had one of the lowest rates of uninsured: about 370,000 to 500,000 people, or about 6 percent to 8 percent of the 6.3 million people in the state. It also had in place consumer protection laws, including a "guaranteed issue" law allowing anyone, whether sick or not, to buy insurance.
The progress so farAbout 170,000 of the uninsured have signed up — but most of them are the poor. Just 17,500 have signed up for the unsubsidized health insurance plans, at least through July, but those plans became available just on May 1.
That leaves about 200,000 to 300,000 people uninsured.
Paying the penalty
This year the incentive is weak: Those who can't show proof of insurance by the end of 2007 lose their state tax exemption when they file their income taxes in 2008, about $219.
The penalty increases when tax time comes in 2009. For every month in 2008 that they don't have insurance, residents pay a penalty of half the cost of the lowest-cost plan. That's about $150 a month.
Not just any insurance
The Massachusetts experiment means very little now to the 90 percent of people in the state who already had insurance. But in 2009, their insurance must be good enough to pass a test: It must have prescription drug coverage, and it must have a deductible of no more than $2,000 a year for an individual or $4,000 for a family — low enough for them to avoid big bills for health care. No annual limits or lifetime limits are allowed. An estimated 200,000 people in the state have insurance now that won't meet these tests.
Employer responsibility
Employers who don't either get 25 percent of employees to sign up or else make a one-third contribution to health coverage will pay an annual penalty, called a "fair share contribution," of $295 per worker. This applies only if they have 11 or more employees (or full-time equivalents, counting the hours of part-timers).
Employer groups warn that some employers may reduce the hours of employees so they fall below the law, and some employers offering health insurance now may decide that it's cheaper just to drop it and pay the $295 fee.
Free or cheap insurance for the poor
Free health insurance is available through the new Commonwealth Care program for the uninsured who earn less than 150 percent of the federal poverty line ($15,315 for an individual, $30,975 for a family of four). They pay no premiums, just small co-payments when they receive care, and there's no deductible, so insurance kicks in immediately.
Reduced-cost insurance is available through Commonwealth Care to residents earning up to 300 percent of the poverty level. A couple earning at three times the poverty line, or $41,070, would pay at least $210 a month, or $2,520 a year.
New plans for everyone else
For those who earn too much to get a subsidy, they can shop on their own for insurance or choose from the state's 42 plans offered by six companies. The plans range from $175 to $600 a month, depending on coverage, location and age. Consumers can sign up on the Web site of the Commonwealth Health Insurance Connector Authority. These plans may not seem cheap, but the plans have to cover prescription drugs and have low deductibles. Massachusetts consumers already face relatively high insurance rates, because of the "guaranteed issue" law and other consumer-protection laws. The state says the new plans cost about half of what non-group that covered less were costing before the reform.
Options for young adults
Low-cost plans are available for ages 19-26, starting at about $120 a month, with limits of $50,000 to $100,000 on annual coverage on most plans. Only young adults without employer coverage are eligible. To protect young adults from scams, these plans can be bought only through the state agency. And insurers are required to offer coverage for up to two years after young adults lose their dependent status.
Caught in the middle
Some of the working poor get a pass on the insurance requirement. They don't have to prove they have insurance if their income is too high to qualify for subsidized health insurance and too low to afford the lowest-cost unsubsidized plans. About 160,000 uninsured people in the state earn too much to qualify for the free or subsidized care but can't afford the approved plans. These are mostly people who earn just above three times the poverty level, in addition to some older people who can't pay the high premiums charged to the elderly. Critics have said that the state is backing away from the program already — about 60,000 of these won't be face a penalty for not having insurance by Jan. 1.
Small businesses and self-employed
One of the successes of the program has been getting insurance companies to merge their small-group plans with individual plans. This has opened up affordable insurance to the self-employed and employees of small businesses, lowering their premiums and increasing the amount of care covered by insurance.
New plans extend group coverage to businesses with 50 or fewer employees. Plans can be bought with pre-tax dollars.
More poor children covered
Children in families earning up to three times the poverty level are now covered in the state's Medicaid program.
Who can’t sign up?
The new plans aren't available to workers and their families eligible for company health insurance, or for illegal immigrants.
More for hospitals, doctors
The state Medicaid program will pay hospitals and doctors $90 million more per year, for three years, and will increase payment rates to 95 percent of costs, up from 80 percent. Hospitals must meet quality benchmarks to qualify for increased rates.
Who’s running the show?
A state agency, the Commonwealth Health Insurance Connector Authority, has been set up with a $472 million budget. The chief executive, former insurance executive Jon Kingsdale, is making $225,000 — a significant pay cut from his previous position with Tufts Health Plan, the state's third-largest insurer.
How is it being paid for?
Much of the cost is supposed to come from expected reductions in payments for charity care. In other words, the state hopes that by paying less to reimburse hospitals and doctors for treating people who are uninsured or underinsured, it will help more people get insurance. The state also has federal funds, but those run out in June 2008, and the state would have to negotiate an extension.
More money will now come from a 4 percent fee taken out of the premiums paid by people who sign up through the state for coverage, from the penalties paid by people without insurance and from penalties paid by employers not offering health insurance.
The state hopes to balance the books without a general tax increase. That may depend on getting more young, healthy people to sign up.
What doesn’t the plan do?
It doesn't reduce the role of insurance companies. It's not a single-payer, government-run plan, like the Canadian system.
Neither does it do much to hold down the cost of health care. The state isn't using its leverage as a buyer or as a regulator to hold down costs. It just requires everyone to sign up with the insurance companies.
Who gets the credit or blame?
With former Gov. Mitt Romney seeking the Republican nomination for president in 2008, his supporters are quick to give him credit for the Massachusetts plan.
In 2004, with the costs of covering the uninsured increasing and the federal government threatening to withhold $385 million a year of Medicaid funds unless the state reduced the number of uninsured, proposals came not only from Romney but also from Democrats in the state Legislature and a coalition of health care activists.
While the final plan was based on Romney's proposal, several of its features were approved by legislators over his veto, including the fee on employers who don't offer coverage and the expansion of Medicaid coverage to more children.
The Romney administration also set the employer "fair share" at only 33 percent of the premium, while many employers now pay half or three-fourths of the cost of insurance; some critics say this level will encourage employers to reduce their contributions to insurance coverage. Consumer advocates are pushing for an increase to 50 percent for the minimum employer share.
Where to learn more
- Shop for insurance in Massachusetts: Commonwealth Connector
- The state agency: Commonwealth Health Insurance Connector Authority
- Consumer advocates: Health Care for All
- Cost-control proposals from Health Care for All (PDF file)