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Massachusetts Seeks to Mandate Health Coverage

http://online.wsj.com/article/SB114417948314916841.html

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Bill Would Penalize Citizens
Who Don't Buy Insurance;
Business Fears Higher Costs

By JOHN HECHINGER and DAVID ARMSTRONG
April 5, 2006

In a far-reaching bid to obtain universal health-care coverage in their state, Massachusetts lawmakers overwhelmingly approved a bill that is the first in the nation that requires all citizens to buy medical insurance.

The bill also requires that businesses not offering health insurance pay penalties to help cover the uninsured and uses a combination of added state spending, tax incentives, insurance subsidies and expanded government-insurance programs to reach the estimated 550,000 Massachusetts residents who are currently uninsured. Gov. Mitt Romney, widely viewed as a possible presidential candidate, has indicated he intends to sign the bill.

Massachusetts, a state of 6.4 million people, would join only Hawaii, which for decades has required employer-provided insurance, in attempting to mandate universal coverage, according to the National Conference of State Legislatures. A handful of other states, including California and New York, have measures pending that seek to cover many more state residents, and dozens of others are trying to address the problem in smaller ways.

"States are struggling with this all over the country," said Rachel DeGolia, the operations director for Universal Health Care Action Network, a national nonprofit group pushing for wider health coverage. "What is unique about Massachusetts is they are trying to do something about it."

Richard Cauchi, director of health programs for the state legislatures group, called the individual-mandate requirement in Massachusetts "novel." The tactic, akin to forcing drivers to buy car insurance, "is an untried approach that other states will look at with interest," he said.

Yesterday's action shows that states may prove more adept at coming up with plans to provide universal coverage after President Bill Clinton found such efforts to be a big stumbling block at the federal level in the 1990s. Massachusetts faced a July federal deadline to show that it was working to cover more of the uninsured or face losing $385 million in funding for Medicaid, the federal-state insurance plan for the poor and disabled. Other states -- schedules vary from state to state -- are expected to face similar pressure in coming years.

Though some business groups, such as the Greater Boston Chamber of Commerce, have generally voiced support for the bill, others, especially those representing small businesses, are wary of its effects on costs and job creation. In addition, health-care experts say the plan, despite its bold claims, provides little new money to pay for health care. They note that under Gov. Michael Dukakis, Massachusetts approved a plan for universal health coverage in the late 1980s that died because of lack of money.

Under the plan approved yesterday, uninsured residents who don't buy new, low-cost plans -- some subsidized by the state -- would face financial penalties beginning in July 2007. In the first year, those who don't buy insurance -- provided the state makes available one deemed affordable -- forfeit their personal state tax exemption, now worth about $150. In the second year, those who don't buy would have to pay a fine equal to half of the monthly premium cost of an affordable plan. For a full year, the fine could total about $1,200 for a young adult who would be eligible for an individual plan. There are no criminal penalties for not buying insurance.

In another provision that stirred unease among some businesses, the proposed law would require companies with 11 or more employees to provide health coverage or pay a per-employee annual fee of $295. In addition, employers whose uninsured workers make multiple use of emergency room care -- "free riders," in the bill's parlance -- would have to pay between 10% and 100% of the portion of those medical bills exceeding $50,000.

The bill would shift about $1 billion in government money -- mostly federal -- to several programs to provide low-cost insurance plans to the uninsured. One plan would increase eligibility for state Medicaid to more families; another would provide state subsidies for low-income families; another would create a big insurance pool that aims to make coverage more affordable for small businesses to give their employees the chance to buy health insurance with pretax dollars.

Lawmakers hope that requiring coverage will increase demand for such policies, which private insurers would then be eager to supply. They also hope that reducing reliance on expensive emergency room visits will lower health-care costs.

The bill would require residents to secure coverage by July 2007. Lawmakers said they expect the bill will lead to the coverage of 90% to 95% of uninsured residents by 2009. "This is really a landmark for our state," Gov. Romney said in an interview. "We can do what most people thought was impossible, which is to get health insurance for every citizen without a government takeover and without new taxes."

The bill passed unanimously in the Massachusetts Senate and 155-2 in the House. Although Democrats dominate both chambers, Gov. Romney, a Republican, has been a big advocate of most of the provisions at a time when he is widely believed to be considering running for U.S. president. A successful plan for health-care reform is likely to be a big feature of any run.

Analysts and even supporters acknowledged some potential pitfalls in the bill. First, the state has yet to define what is an "affordable" health-care plan. The bill requires only that individuals buy a plan if the state determines it to be affordable, presumably based on a reasonable percentage of income. The plan relies on private insurers to come up with such plans, and insurers could either fail to do so, or provide plans that aren't attractive or that don't provide much protection.

Alan Sager, a professor of health services at Boston University, said Massachusetts is "leaping into murky waters by obliging individuals to buy coverage." He said the legislation doesn't provide enough funding to solve the problem. "It seems the bill would force individuals to buy very flimsy or expensive policies beyond their financial reach," he said.

Dr. Sager said one recent study estimated that providing health-care coverage to the uninsured in Massachusetts would require an annual state subsidy of $700 million, which is about four times what is provided for in the current legislation.

He also said the legislation contains a Medicaid rate increase for the state's hospitals and doctors that will total $540 million over three years. "This is more money for business-as-usual health care," he said. "Legislators have to trumpet great accomplishments. They conceived an elephant 18 months ago, but have given birth to a mouse."

A spokesman for the Massachusetts Hospital Association said the rate increase comes after years of Medicaid "underpayment," during which the government insurer often paid less than the cost of the service provided.

Gov. Romney has 10 days to sign the bill into law, and though he has said he will do so, he can veto individual measures. He has said he opposes any new payroll taxes for the plan, but considers the penalties on businesses to be fees, not taxes. Yesterday, he said he would examine the $295 fee carefully.

The Massachusetts plan would create a more-than $1 billion-a-year program for the uninsured, though much of it would come from shifting around existing money. The state would kick in $125 million in new spending, mostly for subsidizing health-insurance plans for lower-income residents. The rest could come from existing programs, and the fees on businesses and individuals who don't meet the bill's requirements.

"The rest of the country is waiting for us," said Massachusetts Sen. Therese Murray, a Democrat from Plymouth, Mass., and chairwoman of the Senate Committee on Ways and Means, which hammered out the legislation. "We're going to be the first test case."
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