Massachusetts Health Care Reform Updates
Coordinating the Massachusetts health care reform law with the federal Affordable Care Act (ACA) has proven to be an on-going endeavor.
As background, in 2006, Massachusetts passed a state health care reform law requiring all Massachusetts residents to maintain a minimum level of coverage, or be subject to a state income tax penalty. The law also imposes several requirements on employers. In 2010, the ACA was passed which similarly requires individuals to maintain a minimum level of coverage or risk being subject to a tax penalty. As a result of ACA, certain of the Massachusetts reform provisions either have become unnecessary, or are in conflict with the federal law.
To that end, in July 2013, the Massachusetts Legislature passed a law to repeal certain provisions, including some of the employer obligations, summarized briefly in the August Benefit Beat. One of the requirements that remain in force is the requirement to offer employees the ability to purchase individual coverage through the Massachusetts Connector (the Commonwealth’s Marketplace/Exchange), or otherwise purchase individual coverage on a tax-favored basis through a Section 125 cafeteria plan. This requirement is in conflict with the ACA which prohibits the purchase of individual coverage on a tax-favored basis, as delineated in September, 2013 by way of the Department of Labor’s Technical Release No. 2013-03 and the Internal Revenue Service’s Notice 2013-54.
Recently, the Massachusetts Connector’s governing agency issued Administrative Bulletin 03-13: Changes for Employers Regarding Section 125 Plans and Other Policies stating that it will no longer enforce the IRC Section 125 cafeteria plan requirement. Further, the Connector will no longer enforce the free-rider surcharge that is imposed for failure to offer a Section 125 plan. According to this Bulletin, the Connector anticipates pursuing legislation to repeal the free rider surcharge, the cafeteria plan requirement, and the related Health Insurance Responsibility Disclosure (HIRD) form requirements.
In the meantime, employers can continue to offer a Section 125 option until its first plan’s anniversary occurring in 2014, at which time all employers can no longer offer this option. Employers who have amended their Section 125 plan to allow the purchase of individual policies should review and amend their plans appropriately. Employers who have established a separate Section 125 plan specifically for employees who are not otherwise eligible for the employer plan should review and terminate their plan in accordance with the terms set forth in their Section 125 plan document.
Another component of the Massachusetts health care reform law requires health plans and in certain instances, plan sponsors, to issue the Form 1099-HC reflecting whether their coverage meets minimum creditable coverage (MCC) standards. The Connector’s governing agency has recently issued Administrative Bulletin 02-13: Guidance Regarding Minimum Creditable Coverage (MCC) Certification further clarifying this requirement. Generally, insured plans subject to Massachusetts insurance law are required to provide the Form 1099-HC to covered employees, who in turn, use this documentation as proof of insurance when filing their state tax return. It is also incumbent upon the plan sponsor of a self-funded plan, or an insured plan offered outside the state of Massachusetts, to provide the Form 1099-HC to plan participants. While it is not necessary for the plan to offer MCC standards, it is obligatory to advise covered employees about the status of the plan. For this reason, it is necessary to know whether the plan meets Massachusetts MCC standards.
Generally, a plan can self-determine whether it meets MCC standards. The plan will satisfy the MCC standards if it meets the requirements set forth in the regulation (956 CMR 5.00), including coverage for all core medical and hospital services and benefits, as well as meet an actuarial value equal to or greater than any Bronze-level plan offered through the Connector. If the plan varies slightly from these MCC standards, then the plan may obtain MCC-certification from Connector’s governing agency. This Bulletin provides guidance on how to obtain this certification.
In addition to determining whether a plan meets MCC standards, a plan will also have to comply with ACA provisions. An example of a variance between MCC standards and the ACA is:
- The Massachusetts MCC standard sets a maximum deductible limit that can be imposed on in-network covered services: $2,000 for individuals or $4,000 for family. The maximum out-of-pocket limit is $5,000 for individuals; $10,000 for family.
- For plans subject to the ACA provisions that take effect in 2014 including, among others, the cost-sharing requirements, the maximum deductible limit that can be imposed by small insured plans offered in/outside the Marketplace mirror the same deductible limits (as above) imposed by the Connector. However, the maximum out-of-pocket limit that can be imposed by insured plans offered through the Marketplace, and insured and self-funded plans offered outside the Marketplace is $6,350 for single coverage; $12,700 for coverage for more than one.
More guidance is surely forthcoming on coordinating the Massachusetts health care reform law with the ACA.