New York is not Massachusetts – Health Care Reform Implications

red-sox-and-yankees-logosMassachusetts and New York have always had similarities. Tragically, the Boston Marathon bombers had plans to also terrorize Times Square in Manhattan, New York City. Both states saw their respective Basketball teams battle against each other in the first round of the NBA playoffs. Also, both states are known for having millionaire politicians that made their success in the private sector before entering public service. However, in terms of Health care reform, the differences are vast.

Massachusetts has the lowest uninsured rate in the nation. Since the implementation of Mitt Romney’s Health care reform bill in 2006, the state has increased coverage by an additional 5 percentage points. In 2006, the state’s uninsured rate stood at 11%. Seven years later, the state’s uninsured rate has lowered to roughly 4%. Many studies have since been published hailing “Romneycare” as a success. As a result, the Massachusetts health policy experiment became the precursor to the Health Exchange concept found in the Affordable Care Act (ACA) signed into law by the Obama administration in 2010.

The United States is now less than 5 months away from the first Health Exchange open enrollment date. As 49 other states gear up for this heavy lift, they continue to outline metrics and measures hoping to define success. If New York were to increase health coverage by an additional 5 percentage points, that would translate to an additional 978,000 individuals enrolled and a 9% uninsured rate. However, benchmarking success to Massachusetts is not that easy. New York is not Massachusetts, and as a result there are many Health care reform implications.

health population

As seen in the chart above, New York and Massachusetts have very similar health coverage rates with Public Programs (Medicare/Medicaid) and Individual private insurance. However, the disparities that lead to the higher uninsured rates in New York are found in Employer-sponsored Health coverage. Massachusetts Employers cover 10% more of their state than New York (58% vs.48%).

This difference in employer-sponsored coverage rates may not change with Health Exchanges. In fact, many can argue the disparity between NY and MA can only grow. Employers with 50 employees or more will face penalties for not offering health coverage. However, already more than 95% of those firms in both states offer coverage. There are no penalties for small employers with fewer than 50 employees to offer coverage. However, this is the exact segment that has the highest uninsured rates.

small vs large

Large Employers
Firms with 50 employees or more will face penalties for not offering health coverage. Even though the penalties in the first year will be less than the cost of offering insurance, if we assume that the firms in New York with 50 employees or more will match the health coverage rates of Massachusetts, that equates to a 2.1% increase in employer offer rates. Using Census Data, there are 16,230 businesses in New York with more than 50 employees representing more than 4.8M employees. Currently, 15,581 (or 96%) of these firms offer coverage. Post reform, an additional 341 businesses with roughly 100,000 employees would need to offer coverage to match Massachusetts’ levels. However, these are merely offer rates. Simply offering coverage is very different from employees purchasing the coverage offered. Post-reform, offering coverage for an employer will mean it meets affordability rules. That means it must cost less than 9.5% of an employee’s annual salary. So this 96% offer rate in New York is only predicated on the assumption that the coverage offered will remain affordable under the new ACA employer rules in 2014.

Small Employers

A 2008 Health Affairs article outlined survey results from 1,003 randomly selected Massachusetts businesses. It found that after Health care reform in the state, the percentage of firms with 3 or more workers offering health coverage increased from 73% to 79%. The study also found that small employer offer rates increased from 2007 to 2008. More than 60% of micro small businesses (3-10 employees) and more than 80% of other small businesses (11-50 employees) offered coverage. This is a stark contrast from New York and the national average. In 2012, only 50% of firms with 3-9 employees offered coverage nationally. Additionally, only 73% of firms with 10-24 employees offered coverage nationally. The differences in small employer offer rates stems from the differences in penalties found in the Massachusetts Health care reform bill versus the ACA. Massachusetts required all businesses with more than 11 employees to offer coverage in the face of a $295 penalty per employee. The law also enforced cafeteria plans for small employers which allow employees to pay for health coverage with pre-tax dollars deducted from their paycheck. The ACA only requires businesses with 50 or more employees to offer coverage and lacks a cafeteria plan requirement. As a result, there is little motivation for small employers to offer coverage after reform.

Small Employer Implications

Businesses in states with the highest small employer health insurance prices will most likely find it economical to dump coverage all together rather than offer coverage with the threat of employees going to the Health Exchange anyway  if coverage is more than 9.5% of their salary. Based on a 2010 AHIP study, West Virginia, New York, New Hampshire, Nebraska, and Massachusetts have the highest small business health insurance rates in the nation. These states average a $523 monthly rate for individual employee coverage. As such, an employee in 2014 becomes eligible for the individual exchange if they pay more than 9.5% of their salary towards coverage. For these five most expensive states, that would equate to small employers contributing $474 a month towards the cost of insurance with the employee paying less than $49 a month. These rates are based on 2010 pricing and will only be more expensive in 2014. A recent Washington Post article from May 1st warns about sticker shock as Health plans begin to file their 2014 rate filings. Small business employees with families become the most at risk. The 9.5% of salary is benchmarked at individual employer coverage. It does not relate to the cost of family coverage from an employer. This is a policy gap that must be addressed if states like New York esteem to reach uninsured rates that match Massachusetts.

Click here for more information on the difference between Massachusetts Reform and the Affordable Care Act.

 

 

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Comments

  1. You say:

    “Also, both states are known for having millionaire politicians that made their success in the private sector before entering public service.”

    I don’t know about New York but our recent millionaire senators here in Massachusetts (Lodge, Saltonstall, two Kennedys, Kerry) inherited their money. I don’t believe any of them ever did anything in the dreaded “private sector.” For that matter, I don’t think any of our non-millionaire senators ever worked in the private sector either. They are/were all just career politicians or ivory-tower academics (Brooke, Tsongas, Brown, Warren) with no idea what happens in the real world.

    Similarly, I don’t know what all your source(s) are but some of your information about Massachusetts healthcare looks off. Some of your sources are the far left wing Kaiser and RWJ. I suggest you use the state’s own data. The biggest problem with the analysis is that you are looking at Massachusetts through the employers’ end of the glass. Looking at it from the employee’s point of view, Romneycare has reduced the number of people insured through employment by 2%-3%. Those people were forced into the exchange (where they get much worse insurance at much higher prices UNLESS they were one of the relative few that qualified for free insurance) or they became uninsured.

    (Oh, and just as an aside, the 2006 RomneyCare law was effectively repealed in 2012.)

  2. Interesting article above with supporting stats. Last years article on Massachusettes 5 years after Reform http://www.medicalsolutionscorp.com/p/massachusetts-5-years-after-health-reform actually still holds up.

    To your point on SMB in NYS I agree that this will lead to difficulties of affordable health insurance. An employer sponsoring Healthy NY which is 35% below market may find himself priced out of the market. With new consolidation and discontinuation of successful Healthy NY he will cancel the plan coverage and rely on Federal subsidies. Yet this won’t help those employees who cannot get a sizable subsidy. It remains to be seen what the indiv market rates will be. After all a 20% subsidy off a plan thats double the Healthy NY rates maybe a step backwards.

    Unlike Massachusettes which has fully recognized the role of the Broker, NYS will be spending millions on developing online Exchanges and Navigators. The Navigator will have exclusivity in compensation on the Individual Exchange. Mass. has always use the Broker on the Individual Exchange known as the Connector but compensated below market. When compensation was increased to mirror the standard market enrollment rebounded and the Connector became a success.

    We question the wisdom of discontinuing popular affordable solutions for SMB. The Broker has been a trusted professional for groups and protecting individuals saving collectively millions $ with consumer advocacy for customer service, claims support, billing problems, recredentialing, appeals going up to the state, Medicare, employee education, wellness programs, HR, COBRA Administration, and PPACA compliance.

    Ironically the groups who can least afford health care will get hit the hardest with compliance on State Mandates that accounts for 15% of the costs. Self insured groups relegated to larger groups can self insured governed by the Federal ERISA and bypass this. Additionally, large groups over 50+ likely have an HR Dept to help navigate PPACA. Historically, SMB and individuals have relied on the Broker as a defacto-HR but with NYS Brokers getting cut out it remains to be seen if Brokers can still afford services at no cost.

    Back to the Navigator. They have played an important role as “Facilitators” for helping individual public programs such as Medicaid and State Programs such as Child Health Plus. In NYS they will not only have exclusivity to Individual Exchange compensation but also now embark on Group Business under the SHOP Exchange now.

    Our hopes and concerns have been the affordability of health care for SMB. With $1.3 Trillion going to implementation of PPACA it would be short sighted to experiment with unproven distributions and dismantling of affordable popular plans.

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