Cost and Coverage: The Impact of Implementing Various State Health Care Reform Proposals Nationally. Features

06/01/2008

The features included in the combined model include: an individual mandate, insurance market reforms, premium subsidies for low-income populations, mandatory Section 125 plans, an employer mandate, and a creditable coverage requirement.

Individual mandate.  All individuals would be required to obtain health insurance coverage or pay a penalty equal to one half the cost of coverage (less any subsidy they could have received).  The mandate would be enforced through automatic enrollment facilitated through the tax system, other income tested programs, and schools.  Individuals in families with incomes between 300% and 600% FPL would be exempt from the mandate, and could elect to remain uninsured, if the cost of coverage exceeded a certain percentage of income, ranging from 5.5% for the lowest income families to 8.6% for higher income families.

Insurance market reforms.  The insurance market would be modified to assure that all individuals can obtain coverage.  The reform would require guaranteed issue, so that no one could be turned down for coverage for any reason.  Also, premiums could not be varied based on health status.  These protections would ensure individuals could obtain the necessary coverage to meet the individual mandate requirements.

Premium subsidies.  Premium subsidies would be provided for individuals in families earning up to 300% FPL.  Those with income below 150% FPL would receive fully subsidized premiums, while those with incomes between 150% and 300% FPL would receive a partial subsidy that decreases as income increases.  The amount of the individual contribution to the premium would be equal to between 2 and 5 percent of income, with the remainder being covered by the subsidy.

Mandatory Section 125 plans.  Employers with 10 or more workers would be required to create Section 125 plans so that their employees could purchase health insurance coverage using pre-tax dollars.

Employer mandate.  Like the Massachusetts program, employers would be assessed a $295 fair share contribution for each employee who does not have health insurance coverage.  Firms are not assessed the fee if they offer coverage to all employees and pay at least 33% of the premium.  Uninsured workers of firms who pay the assessment are not automatically enrolled into an alternate coverage program.  The assessments would be used to fund, in part, the premium subsidies for low-income families (see above).

Creditable coverage.  The mandate for coverage includes a defined benefits package, which must be met to meet the coverage obligation and to receive the premium subsidy (for those eligible).  The benefit package required to be eligible for the subsidy is modeled after the Massachusetts Commonwealth care plans, described in the Health Insurance Premium Subsidy Programs section.  For those not eligible for the subsidy, creditable coverage would be a benefit package that is actuarially equivalent to the Federal employees’ BlueCross Blue Shield standard plan.  This is estimated to have an actuarial value at approximately the 60th percentile of employer health plans (Lewin, 2008).

Excluded features.  The features of the Massachusetts plan that were not included in our combined model consist of an expansion of the State Children’s Health Insurance Program (SCHIP), improved Medicaid and SCHIP provider payment rates, and the creation of a health insurance “connector” program.

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