HCW Benefits Blog

Contributor:
Steve Byrd, Consultant
Hill, Chesson & Woody 

As the details of the federal healthcare reform legislation continue to unfold, experts are still trying to get a clear picture of how the laws will actually impact the healthcare industry and its consumers down the road.  While effects of several reform provisions will not be felt until 2014 and beyond, supporters suggest the laws will eventually have a positive effect on healthcare costs and lead to more accessible care.  Detractors, meanwhile, claim the laws will eventually lead to an even more financially-unstable U.S. healthcare system lacking quality care and limiting access.  But if anyone is looking for a true gauge as to how federal healthcare reform will play out, they may only need to look as far as the reform provisions enacted in Massachusetts three years ago.

The Massachusetts reform model contains several similar components that were incorporated into the national reform legislation recently passed by Congress.  Currently, Massachusetts residents are required to have health insurance or pay a tax penalty unless they fall below a minimum income threshold (currently $66,000 for a family of four or 300% of the federal poverty level), and employers of a particular size (over 11 employees) are required to offer health insurance or pay a penalty.  The program also expands Medicaid coverage to cover more of the poor and provides subsidies for low- to middle-income residents, and creates an insurance exchange where individuals can purchase coverage from private insurers.

Now in its third year, the program has succeeded in providing healthcare coverage to more people across Massachusetts.  In fact, 97% of the state's population now has health coverage - the highest percentage in the U.S.  Further, the Massachusetts Taxpayers Foundation, a non-partisan research group, recently concluded that the overall cost has been "relatively modest and well within early projections of how much the state would have to spend to implement reform."  However, critics of the program are quick to point out that there are several deficiencies that need to be addressed.

Since the program's inception: more people began to need subsidized assistance from the state; initial benefit levels started being mitigated (reduced) as premiums continued to rise; new taxes were levied and cuts to other state sponsored programs were implemented to help pay for the reform; more people began reporting trouble paying their medical costs; access to care was being limited with the addition of more uninsured into the pool; more people were being exempted from the penalty due to medical hardship; and people without subsidized assistance began complaining about their increasing health premiums.  But the most significant problem may be its lack of effect on the rising costs of healthcare.

Traditionally, Massachusetts has seen some of the highest healthcare costs in the U.S.  When United Benefit Advisors conducted a survey of employer health benefits in 2007, Massachusetts had the highest annual health plan cost per employee in the country, with an increase from $8,631 in 2006 to $9,304 in 2007.  The cost increases have not abated in the three years of the program's existence, and now many residents are facing increasing premiums while being forced to make the choice to purchase lower cost plans with reduced benefits - something that could become a concern for the rest of the nation as federal reform provisions take effect.

Massachusetts politicians are responding by promising to place caps on insurance premiums and on medical services, but that may have an adverse effect on the state's insurance carriers, which are not-for-profit groups.  These carriers are already being forced to hold their rates at 2009 levels until their proposed rate increases can be reviewed, which has prompted the carriers to refuse sales at current rates.

Thus, the state is left with the option of enforcing governmental price control measures, which is something that could be seen on the federal level.  The concern with price controls is that they would put additional strain on the state's budget and possibly drive suppliers of medical services out of the market, further restricting access to effective care.  As discussed in the Eyes on Benefits dated January 14, 2010, price controls in the healthcare sector can eventually lead to a significant loss of jobs and incentive for innovations.

With the similarities between the Massachusetts and federal reform programs, experts will continue to draw parallel conclusions regarding both.  But as long as one of the main goals of reform is to lower overall healthcare costs, all eyes will be on the direction taken by the Massachusetts experiment.

For more information, please visit the following links:

• Can Massachusetts' Experiment Tell Us What's Next?
• The New York Times: The Massachusetts Healthcare Plan is Working
• Institute for America's Future Report on Massachusetts Healthcare Reform