With all of the focus on the federal Affordable Care Act (“ACA”), many employers are wondering if they still need to comply with state and local health plan mandates. There is nothing in ACA that repealed state or local mandates. The fate of those mandates is up to the applicable state or local government. Below is an update on the state of the law in Massachusetts.
Massachusetts has taken steps to try to avoid overlap of its mandatory health coverage requirements with ACA mandates on employer-provided health insurance.
Fair Share Contribution & HIRD Form Repealed
Beginning July 1, 2013, if you employ 11 or more full-time employees in Massachusetts, you are no longer required to offer group health plan coverage or pay a “Fair Share Contribution” of $295 per employee to the Massachusetts Health Safety Net Trust Fund.
Massachusetts also repealed, effective July 1, 2013,the requirement to obtain a “Health Insurance Responsibility Disclosure” or “HIRD” from employees who declined participation in your group health plan or cafeteria plan.
Employer Medical Assistance Contribution
Perhaps to offset some of the fiscal impacts of the above 2013 repeals, the Massachusetts legislature added a new assessment on employers called the Employer Medical Assistance Contribution (“EMAC”) that will slightly increase the cost of doing business in Massachusetts. The EMAC applies to you if you have more than 5 employees in Massachusetts, regardless of whether you offer health coverage to employees. The amount of the EMAC is 0.36% of all wages up to the Massachusetts unemployment insurance taxable wage base, which is currently $14,000 (this translates to approximately $50 per employee per year). A reduced assessment applies in the first two years if you are newly subject to the Massachusetts employment law. The EMAC is to be paid in the same manner as the Massachusetts unemployment assistance contribution and takes effect January 1, 2014.
The Cafeteria Plan Conundrum
Unfortunately, Massachusetts chose not to repeal the requirement that employers offer certain eligible employees a pre-tax option for purchasing medical coverage through a cafeteria plan and, in fact, added a new employer notice requirement that took effect on July 1, 2013 and requires that each employer advise its employees of its compliance with the cafeteria plan requirement and the employee’s right to enroll in the employer’s group health plan or the Health Connector. If you are subject to the cafeteria plan requirement in Massachusetts, up until the end of this year you have been able to comply with the law and avoid the "free rider" penalties by utilizing the state-sponsored pre-tax payment option that provided for individual coverage to be purchased by your employees in the Health Connector. However, now that the Health Connector will on January 1, 2014 become Massachusetts’ version of the Health Insurance Marketplace (or public insurance exchange) you will be unable to continue to use this approach. This is because ACA prohibits using cafeteria plans to purchase individual coverage in a state's Health Insurance Marketplace. In recognition of this fact, the Massachusetts Health Connector sent letters to employers within the past two months indicating that its pre-tax payment option would no longer be available to employers after December 31, 2013 and that employers would be on their own to make pre-tax health insurance available to its Massachusetts-protected employees who are otherwise ineligible for the employer's group health plan (usually this is part-time employees).
This upcoming change has created headaches for many employers who have been unable to find insurers willing to issue a separate group insurance policy or individual policies in the private market to this mostly part-time group (and on an employee-pay-all basis), or who had concerns about their ability to offer such coverage on a pre-tax basis.
Fortunately, the Massachusetts Health Connector recognized the difficulty that employers were having in trying to satisfy both state and federal law, and recently announced its intention to pursue legislation repealing the state’s cafeteria plan requirements. The Health Connector announced it will not enforce these requirements (including the new notice requirement) beginning in 2014, pending a decision by legislators as to whether to repeal the law. (See the Administrative Bulletin here. As a result, for 2014 employers with operations in Massachusetts will no longer need to worry about compliance with the Massachusetts mandatory health coverage requirements, including the cafeteria plan requirements. They will only need to make their required EMAC payment. If you are an employer who has already adopted a separate cafeteria plan or broadened eligibility in your employer group health plan in order to comply with the Massachusetts requirements as to your part-time employees (or other employees for whom you must provide separate coverage), you now have the option to terminate this coverage for 2014.
It is important to note, however, that technically the cafeteria plan requirements are still part of Massachusetts law. You should stay tuned for future developments. Although it is not expected, if the Massachusetts legislature were to decide not to repeal the cafeteria plan portion of the law, you may need to quickly bring your offerings and practices into compliance.