In a November 20, 2017 post, we reported on Massachusetts’ passage of H. 3822, “An Act Further Regulating Employer Contributions to Health Care,” (the “Act”), the purpose of which is to shore up the finances of the Commonwealth’s Medicaid program and its Children’s Health Insurance Program (CHIP). The law has two components or tiers.

  • Tier 1 increases the Employer Medical Assistance Contribution (“EMAC”) from an annual maximum fee of $51 per employee to $77 per employee; and
  • Tier 2 imposes a tax penalty— or “EMAC supplement”— on employers with more than 5 employees. The penalty is 5% of a covered employee’s unemployment insurance taxable wages up to the $15,000 per year (i.e., a cap of $750 per covered employee) for each nondisabled employee who receives health insurance coverage through the Massachusetts Division of Medical Assistance (i.e., MassHealth) or subsidized insurance through the Massachusetts Health Insurance Connector Authority (i.e., ConnectorCare). Employers are not, however, liable for the Tier 2 EMAC supplement in the case of employees who enroll in MassHealth’s Premium Assistance Program.

The Act directs the Commonwealth’s Department of Unemployment Assistance (DUA) to promulgate regulations implementing the new Tier 2 penalty. Employers pay EMAC supplemental contributions quarterly. The DUA recently issued draft rules regulations along with useful set of FAQs on the subject. As we explained previously:

[T]he draft regulations implementing the tier 2 EMAC supplement follow the statute while providing additional details. . . .The rules governing which employers are affected generally follow existing rules governing unemployment insurance in the Commonwealth. Identifying which employers are affected, and how assessments—or “contributions”—are assessed and collected closely track existing law.

Two features of the draft regulations are worth noting.

  • What data is use to determine, and who determines the Tier 2 EMAC supplement payments?

First, the principal responsibly for determining which employees trigger assessments by reason of qualifying for and receiving health insurance coverage from MassHealth or subsidized insurance from ConnectorCare rests with the DUA. Thus the EMAC rules operate in a manner that is fundamentally different from the now repealed “fair share employer contribution” requirement under the 2006 Massachusetts health care reform law. (The Commonwealth’s fair share employer contribution requirement was the precursor, and roughly analogous to the employer shared responsibility provisions of the Affordable Care Act.) Under the fair share employer contribution requirements, employers were obligated to obtain signed forms—referred to as Health Insurance Responsibility Disclosure (or “HIRD”) forms. The Tier 2 EMAC rules don’t operate this way. Rather, the DUA determines and assesses the penalty. Any required EMAC supplement payments that an employer owes are simply added to the statement showing the employer’s Unemployment Insurance.

Subject to the execution of a confidentiality agreement, the DUA will provide the employer employee information for purposes of reviewing and/or appealing the EMAC. An employer may request a hearing to appeal a determination. The request for a hearing must be filed within 10 days of the employer’s receipt of notice of the determination, and the Director issue a written decision affirming, modifying, or revoking its initial determination.

Based on our direct experience with clients and the reports of other benefits practitioners, we understand that some employers are asking employees to voluntarily tell their employees whether they qualify for and are receiving health insurance coverage from MassHealth or subsidized insurance from ConnectorCare. We think this is a bad idea.

We note at the outset that, despite the claim made by some, such a request does not raise HIPAA privacy concerns. While the fact that a person’s enrollment in a particular health plan is PHI in the hands of the health plan or other covered entity, that same employee is free to tell anyone that he or she is enrolled in MassHealth or subsidized insurance from ConnectorCare, or any other group health plan. Rather, the problem is that if an employee is dismissed after disclosing that he or she might be the cause of an EMAC assessment, the employee may claim they have been unlawfully terminated in violation of public policy.

  • Impact on Employers—Redux

We concluded our post of November 20 with the following claim:

If an employee chooses to voluntarily forgo an employer’s offer of coverage and instead applies and qualifies for MassHealth (excluding the premium assistance program) or subsidized ConnectorCare, the employer is penalized irrespective of the quality or affordability of the coverage that it offers. There is no exemption similar to that provided under the Affordable Care Act’s employer shared responsibility rules under which an applicable large employer can escape excise tax exposure by offering coverage that is affordable and provides minimum value.

Where an employer offers coverage that is both affordable and provides minimum value, that employee would not be eligible for subsidized ConnectorCare coverage. So the above statement is misleading in part. Where an employer offers coverage that is both affordable and provides minimum value, it will not be liable for the EMAC supplement with respect to employees who don’t qualify for MassHealth. (Special thanks to Kathryn Wilber, Senior Counsel, Health Policy, at the American Benefits Council for calling this item to our attention.)

On October 13th, President Trump signed an Executive Order directing various federal agencies to consider how to achieve three administration health reform objectives: (1) expand access to Association Health Plans (AHPs); (2) increase the current limits on short-term health insurance; and (3) allow wider use of employer health reimbursement arrangements so employees can buy coverage on their own in the individual market. This post considers what regulatory actions are necessary to accomplish the first objective—expanded access to AHPs.

Continue Reading Expanding Association Health Plans—Which Agencies Need to do What

On June 10, the Departments of Treasury, Labor, and Health and Human Services (The “Departments”) issued a set of proposed regulations dealing with expatriate health plans, excepted benefits, lifetime and annual limits, and short-term, limited-duration insurance. While the media initially focused on the short-term, limited-duration insurance, the provisions in the proposed regulations addressing hospital and fixed indemnity, disease-specific, and supplemental polices merit attention. These polices generally seek to avoid application of the Affordable Care Act’s (ACA) insurance market reforms and other substantive requirements by qualifying as “excepted benefits.” For manufacturers and sellers of excepted benefit products, the challenge is to create a product that will gain traction in the market—i.e., has the requisite “sizzle”—while at the same time avoiding being treated as a “group health plan” that fails to qualify as “excepted.” The proposed rules, if adopted as final, will make this challenge marginally if not significantly more difficult.

In future posts, we will turn our attention to expatriate health plans, lifetime and annual limits, and short-term, limited-duration insurance. This post examines the provisions of the proposed regulations’ treatment of excepted benefits, with a particular focus on accident, hospital and fixed indemnity, disease-specific, and supplemental products and policies.

Continue Reading Hospital and Fixed Indemnity and Disease-Specific Policies in the Cross Hairs: Tri-Agency Proposed Rule Portends Some Disruption