BOSTON – Employers are demanding relief from new fees charged to companies that aren’t providing health insurance to a majority of their workers.
Business leaders say the assessments are crushing some companies, and they want help from lawmakers who are already looking to rein in costs at MassHealth, the state’s Medicaid program.
Companies cannot force workers to accept health coverage, a coalition of business leaders noted in a recent letter to lawmakers. Still, those businesses are “punished” for the thrifty decisions of workers who elect instead to sign up for insurance through MassHealth.
"It's having a very negative effect on business owners, many of whom have been caught off guard by this," said Christopher Carlozzi, Massachusetts state director of the National Federation of Independent Businesses, one of several groups involved in the business coalition.
Carlozzi said the group has heard of assessments ranging from a few hundred dollars to upward of $27,000 in the first quarter of the year.
The fees are twofold. In January, Gov. Charlie Baker rolled out a policy aimed at reducing health care costs by increasing an annual fee, called the Employer Medical Assistance Contribution, from $51 to $77 per employee for those companies where fewer than half of the workers are enrolled in health insurance plans.
In addition, employers are fined up to $750 per employee for those who choose MassHealth or subsidized coverage through the Massachusetts Health Connector
The fees, expected to drum up $200 million a year, will sunset after two years.
Carlozzi said the worst of the impact could come this summer as tourist-related businesses are forced to pay the $750 per worker fine for seasonal help.
Sen. Joan Lovely, D-Salem, who sits on the six-member budget committee, said lawmakers are weighing relief as part of next year's budget.
"A lot of businesses are struggling to make those payments," she said. "So, if there's a way to restructure it to reduce the hit, I'm open to that."
The Senate approved two amendments aimed at providing relief, which are now tied up in negotiations with the House.
One would prevent employers from being charged both the MassHealth assessment and the federal employer shared responsibility payment in the same tax year. The other would allow "nonprofits, high-turnover firms and small businesses" to seek a hardship waiver.
The business coalition wants lawmakers go further by capping quarterly assessments at $187.50 per employee for certain businesses; expanding the period under which businesses are fined for employees who switch to MassHealth from 50 to 90 days; and eliminating the assessments beginning next January.
Bill Tinti, a member of the North Shore Chamber of Commerce's board of directors, calls the Employer Medical Assistance assessment "unfair.”
He said business leaders are concerned about how the quarterly payments will affect nonprofits that provide valuable services and programs for communities.
"Some of the bigger nonprofits are looking at six-figure penalties under this assessment," he said. "For them, it has become a crushing burden."
Paul Lanzikos, executive director of North Shore Elder Services in Danvers, said he was assessed $4,400 in the first quarter for about 90 employees who would otherwise be eligible for the nonprofits's insurance plan with Fallon Health. This year, he switched providers to Blue Cross/Blue Shield.
"We pay very generously for our employees' premiums, but we have a number of low-wage employees who find it more economical to go through the Connector, so we get assessed for that," he said. "Our hands are tied. We can't force them to take it. We can't even ask why they don't take it."
Under the Affordable Care Act, the state cannot block private sector employees from choosing Medicaid, even if they are are also offered employer-sponsored health coverage.
The health care fee has been a major source of friction between the Baker administration and the state's business community.
Last year, Baker pitched a $2,000 per person fee on businesses with 11 or more employees that don’t provide insurance to at least 80 percent of their workforce. The fee was modeled on the "fair-share contribution" that was once part of the state’s health care system, signed into law in 2006.
Lawmakers rejected Baker's MassHealth reforms but approved a new scaled-down health care fee and coupled it with reduced unemployment insurance rates to offset the impact on businesses.
The first round of quarterly assessments went out in April, with a new round expected in July.
Baker is trying to bring down costs at MassHealth, which covers more than 1.9 million people and consumes 40 percent of the state’s $41 billion budget.
MassHealth spending increased 4.4 percent to nearly $17.2 billion from 2015 to 2016, according to the latest data from the Center for Health Information and Analysis. The low-income insurance plan is jointly funded by the state and federal governments.
Republican lawmakers, who’ve supported many of Baker's MassHealth reforms, say inaction by Democrats is driving up costs.
Rep. Lenny Mirra, R-West Newbury, said MassHealth has "moved away from its role as a safety net for the poor and disabled" to "an insurance plan for everyone" by allowing full-time workers to sign up.
He said the state's health care costs have "become totally unsustainable."
Even those who oppose the employer assessments don't fault workers for switching over to government-backed health insurance, which generally offers lower premiums.
The cost of employer-sponsored insurance in Massachusetts was fourth highest in the country in 2016, while the average premium for a plan on the Health Connector was 31 percent below the average in federal health care exchanges, according to the Center for Health Information and Analysis.
Business leaders say besides relief for employers, the state needs to tackle MassHealth costs.
"Small businesses are justifiably concerned that omitting any sort of MassHealth reform effort will no doubt lead to Massachusetts’ employers serving as a continued revenue source," the coalition wrote. "A comprehensive solution is needed that provides both relief to employers and reins-in state spending."
Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group’s newspapers and websites. Email him at firstname.lastname@example.org.