If you live in the state of Massachusetts, you’ve probably heard about some changes that are stirring about in the legislature. Here’s an overview of what’s going on and how it impacts you and your health insurance situation.
The legislature of Massachusetts recently approved a bill that requires all residents to acquire health insurance or face legal consequences. This makes Massachusetts the first state to deal with the problem of incomplete medical coverage by requiring citizens to carry insurance for their health, in the same manner that they require citizens to carry insurance for the cars they drive.
This plan requires all uninsured adults in the state to purchase some kind of an insurance policy by the first of July, 2007, or face a hefty fine. Choices for consumers would be expanded to include a variety of new and inexpensive policies -- ranging from approximately $250, monthly, to nearly free -- from private insurers subsidized by Massachusetts.
Simply put, residents without health insurance of some form will be penalized through state income tax, and businesses that don't provide coverage to their employees would have to pay $295 per employee per year, as well as surcharges for employees who use state-funded free care.
For a state whose healthcare market is dominated by managed care insurance plans and prestigious medical providers with strong brand identities, some important changes are in the works. Governor Romney managed to get the legislature to agree to some deregulation of health insurance in Massachusetts. For example, this legislation allows managed care organizations to offer Health Savings Account (HSA) plans, which only traditional insurers can currently offer in Massachusetts. It also allows the use of coinsurance in managed care plans as a way for those plans to help guide patients towards providers who appear to offer greater value.
Currently, there are a range of community-rating laws, ranging from “modified community rating” to “strict community rating” and the strictness of these ratings. In observance right now, insurance companies, under these types of rules, are required to charge healthy and unhealthy people relatively similar premiums. With this in mind, the fact remains that low premiums typically don’t generate sufficient revenue to cover higher-risk individuals. As a result, health-insurance companies end up raising prices on both healthy and unhealthy individuals, resulting in higher costs for everyone. Several states, such as Massachusetts, along with New York, Kentucky, West Virginia, Vermont and New Hampshire, have seen premiums skyrocket after community-rating or guaranteed-issue laws were imposed.
The significance of the Massachusetts legislation is that it reverses the previous model for health insurance reform. Massachusetts, soon by law, will be committed to restructuring its health insurance system in a manner that looks a lot like big car dealerships, where there are many different kinds of cars to choose from, all at one dealership. That “dealership” is what is now being called the new Massachusetts health insurance “Connector”.
The idea behind a state-sponsored health-insurance clearinghouse or exchange (like the Connector) is that markets sometimes work more efficiently and effectively when there is one central place to facilitate different economic activity. Much like a stock exchange, the health insurance Connector in the Massachusetts legislation will be a clearinghouse to connect buyers and sellers proficiently and to smooth the progress of the collection and transmission of payments, possibly from multiple sources.
The Connector won’t have anything to do with the design of insurance products nor regulate the insurers who offer plans. Insurers will continue per usual to be regulated by the state’s Division of Insurance and will be free to design and price plans they offer through the Connector, which will be subject to the provisions of Massachusetts’ insurance laws.
While uncomplicated in theory, the Connector brings with it a complete shifting of the state’s regulation of health insurance, moving the focus from designing insurance products to designing the framework within which new products can come into view and compete for business. Under this structure, the new market will also be one that searches to meet the needs of patients and consumers, more so than employers.
If you do, begin by visiting mass.gov, the Massachusetts’ government official Web site at www.mass.gov/portal/index.jsp for more details. You can also visit massresources.org for more information, as well.
