With health care costs sky-rocketing and employer-sponsored health coverage increasingly burdensome for many businesses, the employer-related provisions in Chapter 58 have done nothing to stop the erosion of an already weakening foundation of employer-provided health coverage. Businesses are trying to shift rising costs onto workers by providing plans with higher levels of employee cost-sharing and employee contributions to premiums and deductibles or by cutting health care benefits completely. In an attempt to slow the erosion of employer-sponsored health benefits, the Massachusetts Health Reform includes two employer-responsibility provisions. However, in practice they have proven easy to evade and ineffective.

In addition, the law has had unexpected consequences for labor relations in the state. A November 2007 survey found that 28% of businesses with uninsured workers plan to hold down wages so that their employees will qualify for subsidies under the law. The reform was supported by some unions, but has been met with stiff opposition by others in Massachusetts. Nationwide, individual mandates have been opposed by many labor groups. John Sweeny, the president of the AFL-CIO, commented that “forcing uninsured workers to purchase health care coverage or face higher taxes and fines is the cornerstone of (Newt) Gingrich’s health care reform proposals. And it is unconscionable that Massachusetts has adopted this misguided individual mandate.” Workers have been saddled with higher fees and the possibility of fines, while the reform’s attempts to involve business in cost-sharing have not been effective.

The Employer Fair Share Contribution is a portion of the law which requires that all employers with more than 10 employees make a “fair and reasonable contribution” towards their workers’ health premiums, or pay a $295 per worker per year fine to the state. While the fine is small compared to the cost of health insurance, the state has defined “fair and reasonable” so that it is easy for employers to evade the fine in practice. Employers covering 25% of their workers or offering to pay 33% of the premium costs for any plan are off the hook. The employer fine was applied to no firms in 2006 and only 500 firms in 2007, raising a paltry $5 million. The expected revenue from the Fair Share program in 2006 alone was $45 million. Firms have avoided the fine by paying a smaller share of premiums for more of their workers, or by spinning off parts of the business to get under the 11 employee mark.

Another provision of the law, the Employer Free-Rider Surcharge, would fine employers whose uninsured workers receive care through public insurance. However, employers who offer a “cafeteria plan,” allowing workers to pay for their own benefits even if employers pay nothing into the plans, are off the hook.

Health care costs and access have been an increasingly troubling problem for both business and labor interests. Between 2000 and 2005, premiums for employer-based insurance rose an average of 9% each year. Nationwide, the percentage of employees covered by their employer plans dropped from 81% in 2001 to 77% in 2005, and the trend continues. If our current ineffective system remains in place, there is no end in sight for rising costs and limited access to care. A single-payer system will reduce costs for employees and for those employers currently providing care to their workers. This coverage would also be portable from job-to-job and during times of unemployment.

Further Resources:

• “Firms Find Way Around State Health Law,” Alice Dembner, December 2007.
• “Mass Has Yet to Collect Fees From Firms for Healthcare,” Alice Dembner, May 2007.
• “Worker’s Health Insurance: Trends, Issues, and Options to Expand Coverage,” Paul Fronstin, Ph.D., March 2006.
• “Changes in Employees’ Health Insurance Coverage, 2001-2005,” Kaiser Family Foundation, October 2006.
• “Chapter 58 of the Acts of 2006: How the Law Affects Employers,” Joint Committee on Healthcare Financing, October 2006.