Mass. makes health insurance history by making it compulsory

Everyone pays their part: individuals, government, health care providers and employers,” proclaims the document outlining the latest plan to expand health insurance to all citizens in Massachusetts.

The Commonwealth is sailing into uncharted waters by becoming the first state to require all of its adult residents to have some level of health insurance just as it requires all drivers to have auto insurance.

The plan requires that starting July 1, 2007, all adult residents not in the Medicaid or Medicare systems or without access to insurance through their workplace will be required to purchase policies.

Those who do not obtain coverage will lose their personal exemption for that tax year. Additional penalties could approach the premiums they pay for coverage.

Currently, employers with health plans are paying a built-in surcharge to cover the free care for residents without coverage. One aim of the new program is to make all employers pay something. So the plan calls for what is being called a “fair share contribution” from employers with 10 or more employees who do not offer insurance or do not make a “fair and reasonable” contribution to its costs. The “fair share” fee, estimated to be $295 per full time employee per year, reflects a portion of the cost paid by the state for free care. It will be pro-rated for part time or seasonal workers.

The state estimates that there are about 500,000 individuals without health coverage. The uninsured tend to be low income, part time and seasonal workers, single and childless adults, and young adults just starting out. Supporters see the program covering 90-95 percent of the uninsured in the next three years and helping to cut health care costs for employers.

A central component of the plan is a quasi-public clearinghouse where small businesses and individuals can find policies. This entity, Commonwealth Health Insurance Connector, is to make available all of the policies from private insurers in the state.

The Connection would, in some cases, subsidize the premiums, which could be from $200 to $325 a month. A person or family buying through the Connector could qualify to pay a lower premium based on a sliding income scale. Insurance will be free for individuals making less than $9,500 a year. Of the uninsured, an estimated 200,000 are single people earning $29,000 a year or more. Their premiums will not be subsidized.

Individuals will be able to keep their insurance if they change jobs.

Small businesses that do not offer insurance will be required to set up Section 125 plans that allow employees to buy coverage with pre-tax dollars.

The program would allow high deductible policies to be tied to health savings accounts and gives HSAs favorable tax treatment. Family plans will have to allow young adults to stay on the policy for two years past dependency, or until age 25.

The legislation also calls for the eventual merger of the group and non-group markets, which supporters say could reduce single premiums by 25 percent.

Its drafters estimate the program will cost $300 million in the first year and acknowledge that those costs will rise, perhaps to $1 billion by the third year. They are counting on federal monies and payments for health insurance the state already makes to pay for it.

Senate President Robert Travaglini and House Speaker Salvatore DiMasi unveiled the agreement at a Boston news conference. The plan passed overwhelmingly in both the House and the Senate.

Gov. Mitt Romney, a Republican who has shown interest in running for president, has made a health program a priority.

The measure elicited praise from the health insurance community, consumer groups and business.

Dr. Marylou Buyse, president of the Massachusetts Association of Health Plans, called it landmark legislation. “This plan is an important step toward the goal of providing access to coverage for every citizen in the Commonwealth and improving the quality of the health care system,” she said.

John E. McDonough, executive director of Health Care For All, called the bill “an important, meaningful step forward on the road to affordable, quality health insurance coverage for every resident of Massachusetts.”

The Affordable Care Today Coalition of consumers, businesses, labor and hospitals endorsed the plan. “This bill is good for our economy, good for the uninsured, and good for our health care system,” said Phil Edmundson, president of William Gallagher Associates and chairman of ACT. “Covering the uninsured eliminates hidden costs in everyone’s insurance premium.”

Even manufacturers lent their support. Richard Lord, president of Associated Industries of Massachusetts, representing 7,600 businesses, praised the bipartisan accord as “a forward-looking effort to expand access to health care to residents of the state, and to bring health care costs under control.”

Most recognized that while the legislation has passed, there is work to do in putting it into effect.

“(I)implementation of the bill’s many provisions during the period ahead will require cooperation of government, health care providers, employers and individuals. The passage of the bill marks the commencement of a significant effort for the Commonwealth to extend access to health care to all of its citizens,” said AIM’s Lord.