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Massachusetts Health Care Reform--On Second Anniversary of Passage, What Progress Has Been Made?

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Massachusetts' passage of health care reform legislation in April 2006 heralded an exciting new era in state health policy. The reform plan is the most comprehensive effort by a state to achieve near-universal coverage, and arguably the most controversial, given its inclusion of an individual mandate. On the second anniversary of its passage (and 18 months since implementation began), States in Action examines the law's impact on the state's residents and its health care system.

The health reform expanded eligibility for Massachusetts' Medicaid and State Children's Health Insurance Program (SCHIP). In addition, it created two new ways to access health coverage:

  • Commonwealth Care: Publicly subsidized coverage for adults age 19 and older with income below 300 percent of the federal poverty level (FPL). Commonwealth Care offers a choice of four health plans. It is free to individuals with incomes at or below 150 percent of the FPL and available at a sliding scale fee for those between 150 and 300 percent of the FPL.
  • Commonwealth Choice: Private, unsubsidized coverage available to any resident who is not offered coverage through their employer. Commonwealth Choice has three levels of coverage—bronze, silver, and gold—and also offers plans for young adults ages 18 to 26 with lower premiums. Starting this summer, small businesses will be able to offer Commonwealth Choice plans to their employees.

An entity called the Commonwealth Connector Authority oversees the operations of Commonwealth Care and Commonwealth Choice. The Connector is an independent state agency that is responsible for working with health plans and ensuring that affordable options are available.

The law's individual mandate requires that, as of December 31, 2007, all residents age 18 and older must have obtained health insurance or face a fine of $219 on their 2007 state income tax through loss of a personal exemption. Starting this year, those who remain uninsured will pay a penalty for each month they were uninsured, amounting to half the price of the lowest-cost health insurance plan available. The maximum annual penalty is $912. Those who can demonstrate that they are unable to afford coverage will not face any penalties.

Coverage Expansion
Massachusetts' highest priority was to reduce the number of uninsured. Prior to the reform initiative in 2006, there were an estimated 650,000 uninsured residents (out of some 6.4 million).[1] Since its implementation in October 2006, the reform has resulted in coverage of more than 300,000 individuals (see figure).[2]

Health Reform Programs and Enrollment
As of January 1, 2008: Total enrollment = 316,000.

MA Health Reform Program Enrollment
Commonwealth Care[3] 176,000 (as of April 1, 2008
MassHealth 48,000
Commonwealth Choice 16,000
Private Coverage[4] 76,000
Source: Health Care in Massachusetts: Key Indicators, Massachusetts Division of Health Care Finance and Policy, January 2008.

So far, the largest coverage expansions have been among those with the lowest incomes (150 percent of the FPL or less), who are eligible for fully subsidized Commonwealth Care coverage. Enrollment for this target group has exceeded the state's original projection of 150,000.[5] There are several reasons for this: the target population was bigger than originally calculated; 50,000 individuals were automatically moved from the Uncompensated Care Pool into Commonwealth Care; and the state gave grants to dozens of nonprofits and community health centers (totaling $3.5 million over two years) to conduct outreach to low-income residents, particularly immigrants and those in non-English-speaking communities.[6] Complementing this outreach program was a media campaign shown during television broadcasts of Red Sox games, thus reaching a broad constituency.

Quality and Cost Transparency
In addition to expanding coverage, Massachusetts is working to enhance health care quality and promote cost transparency. The reform legislation created the Health Care Quality and Cost Council, which has responsibility for the following:

  • establishing statewide goals for improving health care quality, containing health care costs, and reducing racial and ethnic disparities in health care;
  • demonstrating progress toward achieving those goals; and
  • disseminating, through a consumer-friendly Web site and other media, comparative quality and cost information by facility, clinician, or physician group practice for obstetrical services, physician office visits, high-volume elective surgical procedures, high-volume diagnostic tests, and high-volume therapeutic services.

The Council is made up of senior officials from state agencies such as the Office of Health and Human Services, the Office of Administration and Finance, and the Group Insurance Commission as well as leadership from the private sector, including a corporate employee benefits company, an insurance company, and a value-oriented health care think tank.[7] It is working to develop the Massachusetts Global Health Cost Indicator, which will enable the state to track cost increases and identify specific areas for improvement. The Council is currently working with the Massachusetts Division of Health Care Finance and Policy to scope out the work required to develop such an indicator and will then begin the procurement process.

According to Katharine London, executive director of the Council, "Efforts to improve health care quality, contain costs, and reduce racial and ethnic disparities are critical to any health reform endeavor. The goal of any health reform effort should be to ensure access to care that is safe, effective, patient-centered, timely, efficient, equitable, integrated, and affordable."

Establishment of the Commonwealth Connector
Another important milestone was the creation of the Commonwealth Connector Authority (CCA), which has several responsibilities. It sets affordability standards that determine whether an individual is subject to the coverage mandate, designates benefit standards for "minimum creditable coverage," and grants "seals of approval" to private, unsubsidized health plans available through the Connector.[8]

Massachusetts' health reform has produced impressive results in a short time period. Still, it faces challenges, particularly in terms of ensuring that coverage is affordable for residents and sustaining financing.

Coverage Affordability
The affordability of health coverage is tied to the individual mandate: if coverage is deemed affordable by the state but is not actually affordable to residents, people will be unfairly penalized for not being covered. The CCA has been working to hold down premium increases. While premiums statewide rose by double digits over the course of the last seven years, the Connector was able to keep premium increases within Commonwealth Choice plans for the coming year to an average of 5 percent.[9] It will be difficult to maintain affordable rates, however, in an environment of high health care cost inflation.

Further, residents who feel they cannot afford partially subsidized or unsubsidized care may have fewer options to access care through the safety net. The health reform law reduced funds that reimburse hospitals for providing care to low-income uninsured, shifting dollars to coverage expansion activities.

Massachusetts legislators recognize that near-universal coverage will not be achieved without more aggressively addressing the costs and quality of care. Senate President Therese Murray filed S. 2526, "To Promote Cost Containment, Transparency and Efficiency in the Delivery of Quality Health Care."[10] Referred to as "Health Care Reform II," the Murray bill would require public hearings on any health insurance premium increases over 7 percent, expand access to primary care, including allowing consumers to choose a nurse practitioner as a primary care provider, and implement broad use of electronic health records by 2015. Speaker Salvatore DiMasi commented that "it's time for the cost and quality of health care in the Commonwealth to join access on the road to success for our patients—insured and uninsured alike."

While S.2526 is considered by some stakeholders to be a response to the higher-than-expected costs of implementing health care reform, it should be noted that health care costs in the Commonwealth have increased 60 percent over the past six years. Therefore, rising costs cannot be attributed solely to the reform.

Massachusetts' financing challenge emerges from its success in covering the state's neediest residents. Enrollment in the fully subsidized Commonwealth Care program has been higher than expected, while enrollment in the unsubsidized Commonwealth Choice plans has been lower than anticipated. Therefore, costs to the state have risen dramatically.

Approximately 17,000 individuals have enrolled in one of the Commonwealth Choice plans since July 2007. Of those, 40 percent chose the bronze option, which has the lowest premium, and 23 percent and 9 percent chose the silver and gold options, respectively. Because the bronze plans have higher cost-sharing and deductibles, some advocates worry that Commonwealth Choice enrollees will be underinsured, thereby putting pressure on the state's safety net providers. However, CCA spokesperson Richard Powers maintains that bronze plans meet the same quality standards as do the silver and gold plans, otherwise they would not receive the Authority's seal of approval. "The CCA would not offer those plans if we did not feel they would meet the needs of those buying them. People have the choice to select the plan that best fits their needs."

In addition to higher-than-expected costs, there have been lower-than-expected revenues. When the health reform was enacted, it was estimated that the employer "Fair Share" assessment would contribute $26 million in FY 2008 and $22.5 million in FY 2009. However, a recent report in the Boston Business Journal indicates that 735 companies have paid $6.6 million for FY 2008.[11] It is not clear why revenues have fallen so short of projections, but a detailed study on the issue is due in the fall.

The "Fair Share" assessment is charged to employers who do not provide health coverage to at least 25 percent of their employees or offer to pay at least a third of employee premiums for all employees. Critics contend that this level of contribution is too low, given that, nationally, employers pay on average 84 percent of employee health insurance premiums. Because of funding shortfalls from the Fair Share assessment, the governor has called on employers, hospitals, and insurers to increase their contribution under the "shared responsibility" concept that was the foundation of the state's reform.[12] So far, there has been some discussion of this among stakeholders and state officials. Some advocates expect the legislature to consider a revenue plan later this spring that includes increased contributions from employers, providers, and insurers.

Moving Forward
Two years after the passage of major health reform, Massachusetts can be proud that it has expanded health coverage to nearly half of its previously uninsured residents. Of particular note: many residents chose to enroll in coverage far in advance of the deadline for doing so. In addition, the state has begun to focus on ways to contain health care costs and improve quality. The big issues on the horizon are how the state will enforce the individual mandate and address concerns about keeping coverage affordable. Stakeholders, policymakers, and advocates will be closely watching the appeals review process, which will allow individuals to appeal their fine for not enrolling in insurance coverage. In addition, the state will have to find ways to address the needs of individuals who have access to employer-sponsored insurance but who cannot afford it, and who are not eligible for subsidized coverage.

Finally, it will be crucial to secure sustainable financing. In the short term, Massachusetts is considering a $1-per-pack increase in the cigarette tax, with the expected $152 million in resulting revenue earmarked for health care reform. By July 1, the state will be seeking to confirm a commitment of $1.5 billion in funding over three years from the federal government. Other strategies may include requiring increases in contributions from coalition partners and expanding the number of companies subject to the "Fair Share" assessment.[13]

Health Care For All, a Massachusetts consumer organization that was a driving force behind the health care reform, is optimistic about the Commonwealth's ability to meet the tests ahead. Says Brian Rosman, the organization's director of research, "Throughout the two-year implementation process, the Connector, state officials, and a wide range of stakeholders have worked together to resolve issues as they arise. We know there will always be challenges, but we think there remains a commitment among all parties to overcome the challenges."

For More Information
See: Commonwealth Connector site
Health Care For All Massachusetts site and A Healthy Blog
Community Catalyst site

[1] Uninsurance estimates are according to 2005 and 2006 state and federal surveys. Health Care Reform: Toward a Healthier Commonwealth, Commonwealth Connector; 2006 census, Quick Facts.
[2] Commonwealth Connector: Executive Director's Message, February 15, 2008, available at
[3] Although Commonwealth Care is separate from MassHealth, it is federally subsidized via a Medicaid waiver.
[4] Reports indicate that, as the reforms were implemented, enrollment in private coverage outside of Commonwealth Choice increased. This may have been driven by the merger of the nongroup and small group markets and/or the individual mandate penalties. See

[5] A. Dembner, Subsidized Care Plan's Costs to Double, Boston Globe, February 3, 2008.
[6] Undocumented immigrants are not eligible for regular MassHealth coverage or Commonwealth Care, but are eligible for MassHealth Limited, which provides emergency care. They are also eligible for the Health Safety Net program, which covers care at hospitals and community health centers. See Health Care For All site.
[7] For a complete list of Council members go to the Health Care Quality and Cost Council site.
[8] Through December 31, 2008, minimum creditable coverage refers to any health plan licensed by the Department of Insurance or self-insured health plan; plans do not have to include pharmaceutical coverage. Starting January 1, 2009, minimum creditable coverage will be defined as comprehensive insurance for an individual/family that includes preventive visits, prescription drug coverage up to $250/$500 deductible, $2,000/$4,000 maximum deductible, $5,000/$10,000 maximum annual out-of-pocket, and no annual per-illness benefit maximum.
[9] Commonwealth Connector, Executive Director's Message, February 15, 2008; According to Health Care for All, increased cost-sharing reduced the value of the health plans by about 2 to 3 percent.
[10] Bill text can be found at
[11] M. Hollmer, State's Insurance-Penalty Receipts Below Estimates, Boston Business Journal, March 28, 2008.
[12] A. Dembner, Healthcare Cost Increases Dominate Mass. Budget Debate, Boston Globe, March 26, 2008.
[13] Ibid.

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