UBP blog

10/09/2009

“What’s fair is fair” may not always be the case

Two years after Massachusetts’ landmark health insurance law became effective in 2006, the state’s 4 Division of Unemployment Assistance auditors began knocking on business’ doors.

Their targets were employers who provided incomplete or inconsistent information to the state in earlier reports on their offering of and contribution to employees’ insurance.

As most of us, if not all of us know, the Commonwealth of Massachusetts requires companies with 11-50 full-time employees to either:

  • Have at least 25% of full-time employees enrolled in the employer’s group health plan

-or –

  • Offer to pay at least 33% of health plan premium costs for full-time employees working 90 days or more. 

Companies with 51 or more full-time employees are required to meet both of the above requirements or have at least 75% of their full-time employees enrolled in their group health plan.

As of late, the Commonwealth has audited 426 companies and found 172 (or 40%) had violated the above requirements and thus owed an additional $5 million to their workers’ health insurance premiums.

But is it really their fault?

The easy answer to this question is “yes”, however, the issue we are dealing with here is a complicated one. Here are a couple of reasons why.

Laws are confusing for employers:

Fair Share Contribution rules are so confusing that employers are having a very difficult time complying with them. 38 of the 172 companies who failed the audit have appealed.

On top of keeping their businesses afloat in a downturn economy, employers need to stay on top of very dynamic Federal and State laws and very often find themselves in way over their heads.

Some industries (and companies) have a harder time complying than others:

Companies in the staffing, restaurant and retail industries are among those struggling the most to comply with this law. Here’s an example how for some businesses it can be difficult, if not nearly impossible, to comply with these rules.

Let’s say you’re the owner of a local restaurant chain with 3 locations in Massachusetts and a total of 55 full-time employees as defined by the Commonwealth. Of these 55 employees, 28 are students and young adults still covered under their parents’ plans and 13 are ages 65+ and covered by Medicare. Of the 14 remaining employees, more than half are married to spouses that have employer-sponsored insurance.

What this all means is that employers such as this restaurant owner could offer to pay anywhere from 33 to 100 percent of employees’ premiums but if just one of the 14 employees not covered under their parents’ plans or Medicare waives coverage, they will not be in compliance with just a bit shy of 24% plan participation.

Consumer advocates are encouraging the state to make exceptions for employers that cannot entice 25% of their workforce to enroll in their plan but the state has yet to follow their advice. What are your thoughts on this?

Should employers be “penalized” for hiring workers that are covered elsewhere?

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