How will Massachusetts health insurance reform affect your business and its employees?

What is the employer mandate and who does it impact?

Employers with 11 or more full-time equivalent employees are required to offer cafeteria plan coverage to their employees, either under their own group health plan or through the Commonwealth Health Insurance Connector, and to make a fair and reasonable premium contribution to the health insurance costs of its employees.

Get help setting up a Section 125 cafeteria plan

All Massachusetts employers with 11 or more employees will be required to complete a Fair Share Contribution (FSC) and employer Health Insurance Responsibility Disclosure (HIRD) filing. Individuals that are employed by an employer with 11 or more employees will be asked to sign an employee HIRD form if:

• the employee declined to enroll in an employer sponsored health plan offered and/or
• if that employee declined to participate in the employer’s Section 125 plan.

These forms needed for filing are available on the Division of Health Care Finance and Policy Web site.  More information on the Fair Share Contribution filing can be found at www.mass.gov/fairshare.

• Employers who don't make a “fair and reasonable” premium contribution toward the cost of their employees' health insurance will be subject to a "fair share" assessment, the lower of:
  1. $295 per employee, or
  2. Fair share contribution amount determined annually, plus the per employee cost of services provided by the Uncompensated Care Pool
• Businesses with 10 or fewer full-time employees won't be subject to the "fair share” assessment.
• Independent contractors, temporary, or seasonal employees aren't considered full-time employees.

Employers may also be assessed a “free rider” surcharge if the employer doesn't offer to contribute towards or arrange for the purchase of health insurance on a pre-tax basis (Section 125 plan) and its employees access free care.

• Companies with 11 or more full-time equivalent employees who use more than $50,000 in free care in one year may be liable for between 10% and 100% of hospital costs.
• The free-rider surcharge is triggered when an employee or his or her dependent receives free care more than 3 times a year, or when a company has 5 or more instances of employees or their dependents receiving free care in a year.

How do I determine how many full-time equivalent employees my company employs?

The number of full-time equivalent employees is calculated by dividing:

total payroll hours for the calendar quarter
500

How is a "fair and reasonable contribution" toward employees’ health insurance determined?

The legislation requires that employers with 11 or more full-time equivalent employees make a fair and reasonable premium contribution toward the cost of their employees’ health insurance. If the employer is not making a contribution to their employees’ health insurance, they may be considered liable for making fair share contribution payments to the Commonwealth.

The Division of Health Care Finance and Policy (DHCFP) made changes to how employers comply with the fair share contribution requirements. Below describes new regulations, effective January 1, 2009.

For employers with less than 50 full-time equivalent employees (but more than 11):

To be considered a fair and reasonable contributing employer, one must:

• Have 25% or more of full-time employees enrolled in a group health plan
  OR
• Offer to contribute 33% or more toward the premium cost of any group health plan offered to your employees who have been employed at least 90 days. This includes all full-time employees employed at Massachusetts locations regardless of residency.

For employers with more than 50 employees: 

To be considered a fair and reasonable contributing employer, one must:

• Have 25% or more of full-time employees enrolled in the group health plan and offer to contribute 33% or more toward premium costs of any group health benefit plan offered to employers employed at least 90 days
  OR 
• Have 75% of employees enrolled in the group health plan

In addition to the above, effective October 1, 2009, employers are exempt from a fair share contribution if they are offering a premium reimbursement arrangement, where an employer designates a specific insurance plan for employee enrollment, to all full-time enrollees.

Employers are required to file reports and/or contributions annually or quarterly, based on employer information submitted to the Department of Unemployment Assistance in previous filings.

How do I determine the percentage of employees enrolled in an employer-sponsored group plan?

To meet fair share contribution requirements, an employer must have 25% of employees enrolled in an employer-sponsored group plan. Determine your percentage by dividing:

Total number of enrolled FTEs on the last day of the calendar quarter
Total number of FTEs on payroll on last day of calendar quarter

Who is considered a full-time employee?

A full-time employee (FTE) is someone who works either 35 payroll hours per week or the number of weekly payroll hours that qualifies an employee to be eligible for benefits, whichever is less.

There are a few exceptions that are not considered full-time employees, even if they work 35 or more hours a week. These exceptions don't count toward the calculation of the 25% or 33% requirements discussed above:

• Seasonal employees 
  • Employment not to exceed 16 weeks 
  • Hired by a seasonal employer during the employer’s seasonal period
• Temporary employees 
  • Employment explicitly temporary in nature 
  • Employment not to exceed 12 consecutive weeks during the 12-month period ending on the last day of the reporting quarter
• Independent contractors 
  • Individual provides services not deemed to be employment as defined by Massachusetts General Law

Can employers offer different contribution levels for different employees?

• Employers may not offer higher-paid employees additional insurance plans that are not available to lower-paid employees. Also, employers may not offer high-paid employees a higher percentage of premium contribution than is offered to lower-paid employees.
• Establishing greater contribution levels is permitted for:
  • Increasing lengths of service, as long as it is part of a formal employee benefit plan designed as a reward for longevity
  • Persons who participate in company-sponsored wellness programs.
• Employers may offer different plan options with different contribution levels as long as all options are available to all full-time employees.

What is the Commonwealth Health Insurance Connector?

The Health Connector is a centralized agency which, through a subconnector (Small Business Service Bureau), will enroll small businesses (less than 50 employees) and individuals into health insurance plans provided by private companies. For more information, visit the Health Connector's Web site at www.mass.gov/connector.

The Health Connector began offering access to subsidized products in October, 2006 and began offering commercial products in July, 2007 to:

• Individuals working for offering companies of any size who are not eligible for benefits (part-timers, contractors, new employees)
• Individuals working for non-offering companies of any size
• Non-working individuals
• Small businesses with fewer than 50 employees
• Sole proprietors

The Insurance Partnership will still be available for small businesses (up to 50 employees) and the self-employed to help pay for health insurance. Eligibility for the program has been expanded to include individuals who earn up to 300% of the FPL. For more information on the Insurance Partnership Program, please visit their Web site at www.insurancepartnership.org.

What is minimum creditable coverage and how will I know if my plan meets the requirement?

Minimum Creditable Coverage (MCC) is the least amount of coverage that an individual must obtain to be in compliance with the health care reform individual mandate.  FCHP will provide information to individuals and groups who have coverage through FCHP through their marketing and enrollment materials. 

What do I need to do if I have a probationary period greater than 63 days?

The health care reform legislation requires that all Massachusetts residents aged 18 and older have minimum creditable health insurance coverage (with the exception of a lapse in coverage of 63 days or less). 

• If you as an employer have a probationary period of 63 days or more, your employees may be assessed a penalty. You can choose to change your policy to offer coverage within the 63 day period so that your employees’ coverage complies with the individual mandate and they do not incur a penalty. 

How will the legislation affect my employees who work seasonally or part-time?

View the "fair and reasonable contribution" requirements which address seasonal and part-time employees.

Seasonal, part-time employees and other employees who are not eligible for benefits through a group plan will be able to access health insurance directly. Their options for coverage will depend on their income.

• Low-income uninsured adults 
  Low-income uninsured adults (at or below 150% of the federal poverty level) are able to access comprehensive private insurance from the Health Connector with no monthly premiums or deductibles. Individuals with incomes between 150.1% and 300% of the federal poverty level are eligible for financial assistance based on their income.

Can I continue to offer coverage for some employees and allow others to get it from the Health Connector?

An employer cannot send some employees to the Health Connector without sending all, unless an employee is in his/her waiting period.  Employees can choose to go to the Health Connector, however, under certain circumstances.

What are the expanded dependent age guidelines?

The age of FCHP member dependents has been increased to persons who are under age 26 or for two years after the end of the calendar year in which such persons last qualified as a dependent for federal tax purposes, whichever comes first. The expanded guidelines do not apply to self-insured accounts or the Federal Employees Health Benefits Program.

Michelle’s Law creates a new federal coverage mandate ensuring that dependent students who take a medically necessary leave of absence from school or changes to part-time student status do not lose health coverage.

In order for a dependent to be covered on an FCHP plan, the dependent must be:

• Under 26 years old
• A Massachusetts resident. There are two exceptions:
  • Dependents on PPO plans do not have to be Massachusetts residents to be eligible for dependent age coverage
  • Full-time students who are attending school outside of Massachusetts but maintain their legal residency in Massachusetts can remain on the plan, but are only covered for selected services (including emergency services) while outside the plan service area.
• Considered a qualified dependent or has been considered a qualified dependent within the past two years—with both scenarios based on FCHP and IRS guidelines

Who can I contact if I have more questions?

You can contact FCHP's Corporate Sales Department by phone at 1-800-333-2535 or via email at: employergroups@fchp.org.

Updated 12/17/2009