The individual mandate under the Massachusetts health care reform law will apparently remain in effect in 2014. Consequently, Massachusetts residents must ensure they meet both the minimum essential coverage (MEC) requirement imposed by the Patient Protection and Affordable Care Act (PPACA) and the minimum creditable coverage (MCC) requirement imposed by the Massachusetts law in order to avoid penalties under those laws. Differences between the PPACA and Massachusetts requirements may require employers to obtain a certification (waiver) from the Massachusetts Health Connector (the Connector) to ensure their employees do not face penalties under the state health care reform law. The Massachusetts employer mandate also remains in effect for 2014, barring any last-minute action by Massachusetts state legislators.
KEY ACTION ITEMS
- Employers should review their plans to determine whether the coverage meets the Massachusetts MCC requirements.
- If coverage does not meet the MCC requirements, employers should ensure they have a certification from the Connector. Employers that do not have a certification should file for one.
- Employers with employees in Massachusetts may want to communicate that such employees will be subject to both the federal and state requirements, and let them know whether their health coverage meets the state standards.
January 1, 2014
The board of the Connector voted to retain the state’s individual mandate, so Massachusetts residents will be subject to an individual mandate under both the state’s MCC mandate and the requirement to maintain MEC under the PPACA. Differences in the rules governing MCC and MEC require awareness and review by Massachusetts residents and employers with workers that reside in Massachusetts. Employers that sponsor plans that do not meet the MCC requirements should ensure they have or file for a state certification.
The MCC requirement applies to all adults with private health coverage, regardless of the source (insured or self-insured, individual, small group or large group, grandfathered or non-grandfathered). The maximum penalty for residents who violate the MCC and MEC will be the state penalty, so the state penalty will be reduced by any penalty that must be paid to the federal government.
Individual mandates: MCC and MEC
The Connector has updated its Minimum Creditable Coverage regulations. Under the regulations, a health plan or the aggregate of multiple health benefit plans will be considered to provide MCC if:
- The coverage provides core services and a broad range of benefits. At a minimum, the plan must cover ambulatory patient services, diagnostic and imaging services, emergency services, hospitalization, maternity and newborn care, medical/surgical care, mental health and substance abuse services, prescription drugs, and radiation and chemotherapy.
- The plan meets maximum deductible requirements. The updated MCC regulations slightly modify the deductible requirements and provide for indexing after 2014. For plan or policy years beginning after January 1, 2014, “any deductibles for in-network covered services that are not provided as part of the plan benefits shall not in combination exceed $2,000 for an individual and $4,000 for a family,” and separate prescription drug deductibles shall not exceed $250 for an individual and $500 for a family. For 2015 and later, the limits will index using the PPACA adjustment mechanism. Note, however, that federal regulators have indicated they will not apply such maximum deductible requirements under the PPACA to employer group health plans.
Notably, the revised Massachusetts MCC regulation elsewhere authorizes the Connector to exercise its discretion and grant MCC status to plans that do not meet every element of MCC required under the revised regulation, provided the Connector determines the plan:
- Conforms with the regulatory requirements under 956 CMR 5.00 relating to core services and a “broad range of medical benefits”
- Does not fail the standards of minimum creditable coverage established in 956 CMR 5.03(1)(f)(3) (i.e., no overall annual dollar maximum on prescription drugs)
- Has an actuarial value equal to or greater than any bronze-level plan offered through the Connector as certified by an actuary (i.e., 60% AV) [See 956 CMR 5.03(3)(b)(6)]
Consequently, there is a path to satisfy the revised Massachusetts MCC requirements without adopting the $2,000/$4,000 maximum deductibles if the Connector grants them certification under this approach.
- The plan meets out-of-pocket (OOP) requirements. To help align with the PPACA, the updated MCC regulations increase the OOP limits and provide for future indexing. For plan or policy years beginning after 2014, the maximum OOP limit for in-network covered services (or the sum of OOP maximums for in-network covered services) must not exceed the OOP limit for HSA-qualified high-deductible health plans ($6,350 for individual coverage and $12,700 for family coverage). After 2014, the limit will index annually using the PPACA adjustment mechanism. In a separate administrative bulletin, the Connector adopts the OOP transition relief provided by the Departments of Labor, Health and Human Services, and Treasury under which, for the plan year that begins on or after January 1, 2014, plans that use more than one service provider to administer benefits that are subject to the annual OOP limit will be considered to satisfy the requirement if:
- The plan complies with the maximum OOP requirements with respect to its major medical coverage.
- In the event the plan includes a separate OOP maximum that applies to nonmedical benefits (such as prescription drug coverage), the separate OOP maximum does not exceed the $6,350 or $12,700 limits.
Grandfathered health plans are not subject to the PPACA’s OOP requirements. While the Connector adopted the 2014 federal transition relief for the OOP requirements, it did not make an exception for grandfathered health plans. Grandfathered health plans with OOP maximums that will exceed the 2014 limits should ensure they have a certification or should file for a certification.
Employers with employees who reside in Massachusetts will want to review the updated MCC requirements, and determine whether they have a certification or should file for a certification. Employers that filed for MCC status in the past should not have to refile unless they have made material changes to their plans.
The Massachusetts employer mandate also remains in effect. Governor Deval Patrick submitted a proposal that would repeal the state’s employer mandate (i.e., the Fair Share Contribution requirement) effective July 1, 2013. However, the proposal has not been approved by the state legislature. Employers should be aware that the Fair Share Contribution requirement will apply until repealed or otherwise nullified by the state.