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Study: Cost of Health Insurance Still a Concern for Massachusetts Residents

By Susannah Crepet, CQ Staff

July 26 - Massachusetts' attempt to establish nearly universal health coverage may be limited by the costliness of health care, which threatens to discourage individuals and small business from participating, according to a study by the Center for Studying Health System Change (HSC).

The study was based on interviews with about 25 market observers in January 2007 that included representatives of employer groups, state agencies, health plans, providers, advocates, and other health care leaders knowledgeable about the state's health care overhaul, according to a press release.

Massachusetts' universal coverage law requires most uninsured adult residents to have health insurance coverage by July 1, 2007. To help residents obtain insurance, the law requires employers to take steps to increase coverage. Employers with 11 or more workers are required to set up Section 125 plans to allow employees to purchase health insurance with pre-tax dollars, which can reduce employee premiums by an average of 41 percent, according to the HSC brief. If employers do not make a "fair and reasonable" contribution to the cost of workers' coverage, they will have to pay a relatively modest $295 annual fee per worker, researchers said.

The study found that the requirement that individuals must have health coverage could have "spillover consequences" for employers if more employees respond to offers of health coverage, look for greater coverage or pressure their employers to offer health insurance.

Employers with less than 11 workers who are supposedly exempt from the mandates, and who formerly did not offer coverage to their workers, will be pressured to change their ways under the new law. Since all workers face tax penalties for going without health insurance, workers will demand coverage, according to the brief.

"Workers who now decline coverage offered by their employers may choose to participate because of the individual mandate, raising costs for employers," said HSC Researcher Laurie Felland in a press release.

Some state residents, however, would be willing to forgo coverage and pay the tax penalty if the costs of coverage are too high, according to the brief, because frequently, lower-income individuals must prioritize basic needs such as housing and food over obtaining health insurance.

Penalties for individuals who remain uninsured are relatively small this year, according to the brief. By 2008, financial penalties for individuals who forgo coverage will be more substantial, but most small employers have already renewed coverage for that year. As a result, it is unlikely that the first years of the overhaul will have decisive results, researchers said.

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