Massachusetts Employees Could Owe A Lot Under ACA

Gavel and HealthcareJust got word from a source close to this subject that the Massachusetts Board of the Connector (the state agency that administers the state healthcare-law requirements) just approved a measure on Thursday that could mean big penalties for Massachusetts employees in 2014, when healthcare reform mandates kick in, and could affect employers there as well.

Rich Stover, a principal at New York-based Buck Consultants, who testified before the Connector Board back in January about this, tells me the board’s approval of amendments to the state’s idividual-mandate requirements will result in Massachusetts employees being subject to significant penalties even if they have comprehensive health coverage that satisfies the ACA requirements.

Employers there, he says, will have to revise their plan designs or complete an uncertain certification process with the state in order to ensure their employees aren’t hit with such penalities.

Since it’s involved and a bit confusing, here’s his rundown of the whole affair:

In 2006, Massachusetts enacted a health reform law that requires Massachusetts residents age 18 and older to have health coverage that meets certain minimum creditable coverage (MCC) requirements or be subject to tax penalties. This reform law was the model for the federal Patient Protection and Affordable Care Act. Although the MCC requirements only apply to residents and do not apply directly to employers, if an employer plan does not satisfy the MCC requirements, employees and family members enrolled in that employer plan may be subject to these Massachusetts’ tax penalties.  The maximum annual individual penalty for 2012 is $1,260.

With the ACA employer and employee mandates and penalties going into effect in 2014, Massachusetts had to decide whether to continue the individual mandate and MCC requirements [then].  On March 14, the Board of the Connector … met and decided to continue, and strengthen, the individual mandate in 2014. The 2014 requirements could subject Massachusetts residents participating in large employer plans to significant penalties if their employer coverage does not satisfy the new MCC requirements, even though the employer plan fully complies with the federal ACA requirements.

In 2014, Massachusetts will require that medical coverage provide 100 percent coverage for preventive-care service and limit out-of-pocket amounts paid by enrollees to certain maximum amounts.  ACA requires that non-grandfathered plans meet these requirements, but not grandfathered plans or certain retiree plans. In addition, ACA has a special transition rule in 2014 for prescription-drug benefits that Massachusetts is not providing.  So employees in grandfathered plans under ACA may be subject to Massachusetts penalties, even though the plan is fully in compliance with the ACA. Employers can help employees avoid these penalties by filing their plans with the Connector and seeking approval for the plan.

Here, by the way is a helpful link from Stover recapping the board’s Thursday meeting and actions, as well as previous ones.

In essence, Stover says, “employers who had assumed that the Massachusetts requirements would no longer apply with federal reform being effective in 2014 will be very disappointed to learn that the compliance efforts, administration and penalties will continue under state law.”

So what does all this mean for human resource professionals in Massachusetts and possibly beyond?

“As they plan for 2014,” says Stover, “human resource officers will need to make sure they address both the federal and state requirements, which [obviously and apparently] will put an additional burden on Massachusetts employers.”