On March 14, 2017, Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma issued a joint letter with U.S. Department of Health and Human Services (HHS) Secretary Tom Price to the nation's governors, affirming the new Administration's commitment to empowering states "to advance the next wave of innovative solutions to Medicaid's challenges."i On March 22, Massachusetts HHS Secretary Marylou Sudders responded on behalf of the Baker Administration: "Massachusetts is eager to work with HHS…[and has] identified several critical areas that would benefit from swift federal intervention…[including granting Massachusetts the] flexibility to… replace the federal employer mandate with a state-specific approach to shared responsibility for employers."ii

From 2006 until 2013, Massachusetts administered its own employer mandate, the Employer Fair Share Contribution, which required employers with 11 or more full-time employees (FTEs) either to provide their employees with "fair and reasonable premium contributions" or to provide the state with an annual contribution of at least $295 per FTE.iii State collections were credited to the Commonwealth Care Trust Fund, and used to pay for health insurance subsidies for low-income residents (Commonwealth Care) and to support Medicaid providers.iv Fair Share was repealed in 2013 in anticipation of the Affordable Care Act's (ACA) employer mandate, a federal requirement which remains unimplemented.

Between Fair Share's repeal and the implementation of the ACA's expanded Medicaid eligibility provisions, the Baker Administration believes that the Commonwealth has felt "unintended consequences" of the ACA, with nearly half a million lives shifting from employer-sponsored insurance (ESI) into public coverage programs, increasing the state's healthcare costs, while leaving its uninsurance rate unchanged.v Massachusetts's Medicaid (MassHealth) spending on employed individuals increased by more than 250% between 2011 and 2015, excluding previous Commonwealth Care enrollees.vi Without reforms, including a Governor-proposed reinstituted employer mandate (a $2,000 employer contribution per full-time employee), the Baker Administration projects that MassHealth could face a $1.1 billion net funding gap by 2020.vii

Analysis Confirms Declines in Massachusetts's Employer Offer Rates and Employee Health Insurance Access

A Manatt Health analysis of Massachusetts's employer offer rate and employee take-up rate data supports the state's concerns.viii From 2011 to 2015, the percentage of Massachusetts employers offering health insurance fell by 13 percentage points to 52%, with most of the decline occurring since 2013 and from employers with fewer than 50 employees. (See Figure 1.ix) Combined with more modest declines in Massachusetts's employee eligibility and take-up rates, by 2015, fewer than half of Massachusetts's private-sector employees had access to, were eligible for and were enrolled in employer-sponsored health insurance. (See Figure 2.) The number of MassHealth enrollees with verified employment more than doubled during the period.x

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In March, the Massachusetts Center for Health Information and Analysis released its Employer Survey confirming employer offer rate declines into 2016. The report notes a particularly significant drop in offer rates for the Commonwealth's smallest employers since 2011, many of which would have been previously subject to Massachusetts's Employer Fair Share Contribution.

The Massachusetts House Ways and Means Committee has since released a budget that directs the Department of Revenue to proceed with the development of a modified employer mandate, though one that allows for variation by employer and eligibility characteristics.xi The Governor has also continued to work with the business community to incorporate public comment on the size and form of a possible mandate.xii