Cost of near-universal care rising in Massachusetts

Several states have discussed it, but none has gone as far as Massachusetts. In a bipartisan agreement two years ago that many have called historic, the state approved comprehensive health care reform aimed at providing near-universal coverage.

Employers were required to make a “fair and reasonable contribution” to insure workers. Individuals were required to get coverage, through their jobs or on their own. And the state worked to ensure there were affordable options for everyone, with subsidies if needed.

ADVERTISEMENT ADVERTISEMENT

As of Jan. 1, about 340,000 people had been added to the insurance rolls, according to state officials – more than 5 percent of the population – and more than half the 650,000 the federal Consumer Panel Survey had estimated were uninsured two years ago.

So is the reform a success, a model other states can now replicate? The answer is not simple.

Jon Kingsdale, executive director of the Commonwealth Connector, the state agency created by the reform to administer the law, make key policy decisions and help residents find affordable coverage, says the reform “is far from perfect.” But he also notes it is “the first significant expansion of private coverage in decades,” and “strong evidence” that expanding coverage need not just shift people from the private to the public sector.

Yet a large share of the coverage expansion is, in fact, on the state’s tab. From July 2006 to March 2007, the rolls of MassHealth – the state’s Medicaid program – grew by 53,000, and while the growth slowed after that, it did continue.

Plus more than half the newly insured – 174,000 as of last March 1 – were in Commonwealth Care, which provides state-subsidized private coverage to people who cannot get employer coverage or Medicaid and have incomes below 300 percent of the federal poverty line ($31,212 for an individual; $63,612 for a family of four in 2008).

Commonwealth Care is free for children of participating adults, and for adults up to 150 percent of the federal poverty line. Those between 150 and 200 percent pay $35 per month; those between 200 and 250 percent pay $70, and those between 250 and 300 percent pay $105.

As of March 1, however, only about 50,000 of Commonwealth Care participants – less than 29 percent – were paying premiums at all. And while the cost per member has been kept low, at $352.43 per month, according to Connector figures, enrollment has been unexpectedly high.

On April 15, the agency requested an extra $153 million on top of the $472 million budgeted for this fiscal year, which would bring the total budget to $625 million. And the Connector has approved a 12.1-percent average increase in insurers’ rates for the program next year.

The state is increasing its own contributions by only 9.4 percent, and making up the rest by raising premiums for those who pay by about 10 percent, to $39, $77 and $116. Copayments for drugs, doctor visits and other services are also being increased.

Still, the Commonwealth Care budget for fiscal 2009, as requested by Gov. Deval Patrick, is $869 million, a dramatic increase at a time when Massachusetts, which was thriving when the reform was passed, is starting to face budget difficulties.

Another reason for the program’s budget difficulties, however, is arguably a positive. Under the reform, employers with 11 or more full-time-equivalent workers must make a “fair and reasonable” contribution toward their insurance or else pay a “fair share” penalty of $295 per person per year. But while plenty of companies have faced penalties, far more than expected have complied with the law, and offered coverage to previously uninsured workers.

Of the 340,000 newly insured as of Jan. 1, 85,000 are in employer-sponsored plans, according to the Connector, while another 25,000 are in the individual market – buying coverage individually or through the Connector, which offers extra-low-premium plans for young adults (as low as $126 per month for a 24-year-old in Seekonk), as well as Commonwealth Choice plans, which are especially designed to be affordable but offer a range of coverage options.

The growth in employer-sponsored coverage, and businesses’ generally positive attitude toward participating, has been a big factor in the reform’s success, Kingsdale said.

“Overall, employers in Massachusetts have been very supportive,” he said.

And it hasn’t been easy for them.

William Delmage, president of WD & Associates and also of the Rhode Island Business Health Care Advisors Council, said the process of getting insurance has become long and arduous for employer and broker alike, especially when part-time workers are involved.

“Before, you could say, ‘You’re all part-time, so you don’t need insurance,’ ” Delmage said, “but now companies are being fined, so they’re paying attention.”

When workers are ineligible for coverage or say they don’t want it – usually because of the cost – Delmage said he doesn’t leave it at that anymore, but rather he explains the law and leads them to the Connector, to see if they can get affordable coverage there.

Employers who already insured all their workers, on the other hand, have seen little change.

Karl Hetzler, president of H&S Tool and Engineering in Fall River, which has 25 employees, said his first real experience with the reform was when a newly hired truck driver recently declined coverage and instead got on Commonwealth Care.

The company’s Tufts Health Plan coverage would have cost the man $70 per week, Hetzler said, but Commonwealth Care will be just $39 a month. He can see the appeal, and he knows that with the company paying only 50 percent of the premium, the family plans – which cost about $12,000 per year – are even more of a challenge for workers. But he sees a “loophole” here that worries him.

“If the state is dangling a carrot, I think people are going to sniff it out,” he said. Workers may choose not to take employer-based plans because the state plans are cheaper. And employers looking to avoid benefit costs might be drawn to the state.

“As a taxpayer and business owner,” he said, “my concern is I don’t want us to become the state that is a welcome mat for everyone who needs health care.”

As for the insurance market, it is unclear how rates will be affected in the long run. A key principle in insurance is that if you expand the risk pool, especially with healthy people, everyone will pay less. And so far, more than 50,000 of the new Commonwealth Care enrollees are 19 to 26, Kingsdale said, as well as more than half the new Choice enrollees (all of which fits with the known profile of the state’s uninsured, he said).

Commonwealth Choice rates are only rising by an average of 5 percent next year, which state officials celebrated as a major victory, given the typical double-digit hikes seen in the commercial market in recent years. And while Commonwealth Care costs rose far more, Kingsdale said that’s because insurers’ initial rates had been based on inadequate data.

“I would not expect, year over year, to continue to see that rate of increase,” he said.

Delmage said it’s too soon to predict how much, if at all, the reform might reduce costs for employers. But Hetzler did get a great surprise this year: only a 2-percent premium hike.

“I’m thrilled,” he said. “Typically we were seeing double-digit increases: 10, 15, even 20 percent. This year for the first time in years [I’m getting] some promising numbers.”

Laurie Felland, a health researcher at the Center for Health Systems Change, in Washington, D.C., said the center is planning a site visit this month to gauge the reform’s progress. But so far, there are both successes and concerns, and the cost is a particularly big issue.

“I don’t know how many states are looking at this and saying, ‘This is a model we want to replicate,’ ” she said. “They’re looking at individual pieces and seeing what is making the biggest impact.” •