Commonwealth Care Phase II

							 Massachusetts’ Section 125
Requirement: Implementation
    and Lessons Learned


      Jon Kingsdale
 Commonwealth Health Insurance
     Connector Authority
        July 18, 2008
Agenda
 Policy Objectives

 Overview of Massachusetts’ Section 125
  Requirements

 Survey/Case Study Results

 Key Findings and Lessons Learned
                                           2
 Policy Objectives

 Reduce net cost of health insurance by taking
  advantage of federal and state tax codes
 Extend pre-tax option to non-benefits-eligible
  employees (e.g., part-timers, contract workers)
 Reduce use/cost of uncompensated care pool
  (i.e., health safety net)


                                               3
Overview of MA’s Section 125
Requirement
 Applies to all Massachusetts employers with 11
  or more full-time equivalent employees

 Premium-only plan that allows employees to
  pay health insurance premiums “pre-tax”

 Eligible employees must have access to at least
  one health plan

 No employer contribution required
                                                    4
Overview of MA’s Section 125
Requirement (cont.)
 Up to two months waiting period permitted

 Advantages to designating the Connector, but
  not a requirement

 Employers that do not offer a Sec. 125 plan
  subject to Free Rider Surcharge

                                                 5
Advantages of Using the Connector

 Employee choice of benefits level and carriers

 Ease of administration & aggregation of billing

 Employer NOT positioned as endorsing any one
  plan

 One-stop shopping for info on Reform
                                                    6
Section 125 – Implementation Timeline

 April 2006 -- health reform law enacted
 Jan. 2007 -- original Section 125 effective date,
  subsequently revised to July 2007
 March 2007 -- draft 125 regulations issued
 March - May 2007 -- public comment period
 July 2007 -- regulations take effect
 September/October 2007 -- health insurance
  coverage effective date
                                                  7
Section 125 – MA Exclusions
 Employees under age 18

 Temporary employees (less than 12 consecutive
  weeks)

 Employees working, on average, fewer than 64
  hours per month

 Wait staff, service employees or service
  bartenders who earn, on average, less than $400
  in monthly payroll wages
                                                    8
Section 125 – MA Exclusions (cont.)
 Employees covered by collectively-bargained
  multi-employer plans (Taft-Hartley, MEWA)
 Students employed as interns or as cooperative
  education student workers

 Employers offering 100% premium contribution
 Seasonal employees (state certified) and seasonal
  international workers with either:
      U.S. J-1 student visa, or
      U.S. H2B visa and who are also enrolled in travel health
       insurance                                                  9
Section 125 – MA Exclusions Not
Intuitive
 These exclusions and other specifics in the regs
  are simply not intuitive—need to consult with
  employers, brokers, consultants, health &
  welfare fund administrators, HR lawyers, etc.

 On our website for your information are
  hand0book, sample mailings, etc.



                                                     10
Survey/Case Study Results
 Evaluation of initial implementation of
  Section 125 plan requirement

 Six employer case studies (small, mid-sized,
  and large)

 Survey sent to >2,800 employers -- 728
  completed (25% response rate)
                                            11
Key Findings
 After initial trepidation, most employers
  report positive experience (< 20 hours)
 Wide variation in amount of education and
  outreach -- may affect take-up
 Jargon-free materials are a necessity for both
  employers and employees
   Tax law + health benefits = confusion
   E.g.: “don’t pay taxes” better than “salary
    reduction”                                    12
Key Findings
 Frequent communication with employers is
  necessary to keep them engaged
 Administrative simplicity is crucial to
  success
 In a state with relatively few uninsured and
  very small non-group market, take-up rate
  has been low, so far

                                             13
Lessons Learned
 Upfront, frequent and ongoing
  consultations with employers and benefits
  professionals is critical to maintain buy-in

 Outreach and education to employers and
  employees can’t be overstated

 Target employers that don’t offer ESI
                                             14
Lessons Learned (cont.)
 Most employers can’t/won’t dedicate inordinate
  amount of time on non-benefits-eligible
  employees

 May need to communicate directly with
  employees, e.g., other non-group enrollees

 Brokers and consultants play a major role in
  advising employers
                                                 15
Lessons Learned (cont.)

 Simplify, simplify, simplify

 It all comes down to $$




                                 16
Exemplary Employer: Market Basket

  14,000 employees, of whom 4,500 are MA part-
   timers eligible for s. 125 “V.P.” only

  Started with an enrollment goal & a real plan

  Interactive in-store meetings, train-the-trainers
   (store managers), English & Spanish,

  Enrollment has grown slowly since last fall, but
   only to 65 subscribers today (<1.5% of eligibles)
                                                       17