Massachusetts passes charity care bill, rolls dice on ERISA, insurance subsidy plan
MA Charity Care Bill
June 30, 1997
Opening the door to a possible court challenge, Massachusetts legislators have passed a charity care bill that requires private third-party payers, including self-insured plans, to make direct contributions totaling $100 million to the state’s uncompensated care pool for hospitals.
The bill, which now has been approved by both houses of the legislature, also tackles the issue of how to pay for uncompensated hospital care--estimated at $460 million last year--by trying to get more people on insurance. Massachusetts has 653,000 uninsured residents.
Legislators agreed to fund an Insurance Reimbursement Program (IRP) that will subsidize private insurance for workers with incomes below 200% of the federal poverty level (FPL), although it probably won’t be implemented until January 1999. The program promotes employer-sponsored insurance because, for employees to get assistance, their employer must pay at least 50% of the cost of their premiums.
"We like the IRP, the idea of making subsidies available to low-income individuals who couldn’t afford to purchase coverage," says Bo Piela, spokesman for the Massachusetts HMO Association."
Mr. Piela says his members do not object to paying $100 million directly into the uncompensated care pool. But, his members worry they will pay a disproportionate share of the total if a court rules that the Employee Retirement Income Security Act (ERISA) preempts the state from collecting from self-insured plans. The burden would then fall on fully insured plans, which are mostly used by smaller businesses.The self-insured plans are mostly large businesses.
Despite the threat of a suit, hospitals say the $100 million in direct contributions (they originally pushed for $200 million) is important because the current method for generating revenue for the pool doesn’t work well in today’s competitive health market. Plans and insurers are supposed to pay assessments on their hospital charges for uncompensated care, but these often get dropped during an individual hospital’s negotiations over rates.
Brian Rosman, counsel for the Joint Health Care Committee, says the state believes the collection mechanism for the pool—based on the estimated volume of hospital services purchased by payers—will withstand an ERISA challenge because it is not directed at self-insured plans, but at all payers.
The DMA projects that about 140,000 currently insured and uninsured workers will participate in the Insurance Reimbursement Program.
As part of the agreement, two urban hospitals, which were the dominant users of the uncompensated care pool, Boston Medical Center and Cambridge Health Authority, will receive supplementary payments of $70 million for Medicaid managed care enrollees. This money will help support free care at these institutions and will supplant uncompensated care funds.
The two hospitals are in the process of being certified as pre-paid health plans so that they can enroll patients into their own Medicaid managed care plans.
"We are on the verge of enacting legislation that will give Massachusetts one of the strongest health-care safety nets in the nation," stated Massachusetts Hospital Association President Ronald Hollander in a bulletin published by the MHA.
Some suburban and rural hospitals resented that they were only able to collect 30 cents on the dollar for uncompensated care while these two hospitals were collecting "99 cents on the dollar because they were so dependent on the pool," Mr. Rosman says. The more dependent a hospital is on the pool, the higher percentage it is able to collect on its claims, he says.
The state is taking several other steps to reduce the demands on the pool for uncompensated care.
• Beginning July 1, Massachusetts will enroll for the first time some adult residents with incomes between 100% and 133% of the federal poverty level (FPL) into the Medicaid program. Newly eligible for Medicaid are those with disabilities, the long-term unemployed and those with children receiving Medicaid. The expansion could bring as many as 130,000 new people into the Medicaid program, according to Dawn Bennett, at the Division of Medical Assistance.
• The Massachusetts Fisherman’s Partnership Program could receive up to $2 million for a demonstration project to provide coverage to fishermen and their families depending on how the House and Senate bills are reconciled.
• Massachusetts hospitals will be required to help steer eligible patients into the Medicaid program or other programs so that they can obtain insurance. "They (hospitals) will have a legal responsibility to help people figure it out before they bill for uncompensated care," says Dave Webster, budget analyst for the Division for Medical Assistance (DMA).
Ms. Bennett says the state will provide an outreach worker and an eligibility worker at both Boston Medical Center and Cambridge Health Authority. What, if any, additional resources will be available for other hospitals is not known yet. The state already has 10 field workers for hospitals and community organizations.
A big question for Massachusetts is how many employers that do not currently insure their employees will be brought into the system if they get a subsidy. The fear, according to Mr. Rosman, is that only employers who already insure their employees will take advantage of the IRP. Legislators remain skeptical about how much participation the state will get from those who don’t provide insurance. To increase the chances of bringing in the uninsured, legislators voted to restrict the IRP to firms with 50 or less workers.
The Health Care Finance Administration, which is providing matching funds, was reluctant to subsidize those who are already insured by their employers. But the state felt it was not fair to reward firms that were not insuring workers and to penalize those that had been "doing the right thing."
Matching funds
Mr. Webster says HCFA has agreed to provide matching funds for all employees whether they are previously insured or uninsured. However, the agency will only provide matching funds for employers who previously did not insure their employees. HCFA has promised to revisit the issue in a few years.
The DMA projects that about 140,000 currently insured and uninsured workers will participate, according to Mr. Webster. If IRP succeeds in attracting employers and employees, the money will come from the uncompensated care pool. Up to $100 million can be taken from the pool to fund the program.
Contact Mr. Rosman at 617-722-2130 or Mr. Webster at 617-210-5028.
Massachusetts subsidies for IRP
Employers: Annual state subsidy to employer who pays 50% or more of cost of health insurance for employee (also available to the self-employed):
Individual Two persons Family
$400 $800 $1,000
Employees:
State will pay portion of premium depending on income and level of employer contribution to cost of premiums
Massachusetts passes charity care bill, rolls dice on ERISA, insurance subsidy plan
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