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What the health care overhaul means for Massachusetts

March 22, 2010

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Although Massachusetts already has the lowest rate of uninsured residents in the country because of its own health care coverage expansion, the measure voted upon by the House yesterday would have significant impacts on the state. Here are some of the ways the proposed law would affect Massachusetts:

Medicaid money increase
Massachusetts would receive a $2 billion boost in Medicaid assistance over 10 years to help pay for insurance coverage for lower-income residents. The money comes through a provision to compensate states for covering more Medicaid patients; Massachusetts already covers more low-income residents than most states. The Senate bill would have granted Massachusetts $500 million over three years but had no guarantee of extra assistance after that.

Individual health insurance requirement
The tax penalty for not having insurance would be significantly lower for most residents under the federal plan than under the state’s 2006 overhaul. Under state law, nearly everyone is required to have insurance or pay a penalty. Low-income people are exempted. The maximum penalty in 2010 is $93 for each month a person does not have coverage, for a total of $1,116 a year. Under the federal plan, starting in 2014, the annual penalty for not having insurance is $95, but rises after that. In 2016, for example, a person would pay the greater of two alternatives: either a flat annual fee of $695 or 2.5 percent of their annual income.

More residents would qualify for subsidies
The federal plan would allow an estimated 75,000 additional moderate-income Massachusetts residents to qualify for subsidies to help them pay premiums. Under the Massachusetts 2006 overhaul, people with incomes up to three times the federal poverty level are eligible for subsidies. That translates to an income of $66,150 for a family of four and $32,490 for an individual. But under the federal plan, tax credits are provided to help pay for insurance, and that aid is available for people with incomes up to four times the federal poverty level, which is $88,200 for a family of four and $43,320 for an individual.

Effects on small business
Employers with fewer than 50 workers would be exempt from a tax penalty for not offering insurance. That’s a significant change from the Massachusetts health law, which requires companies with 11 or more full-time equivalent workers to offer coverage or face a penalty. The federal program would provide assistance to small employers (less than 25 employees) who provide coverage. In 2010 through 2013, small employers would receive a tax credit for up to 35 percent of their contribution toward employees’ premiums. The credit increases to 50 percent of employees’ health costs after 2013. Nonprofits are also eligible.

New tax on high-cost insurance plans
There would be a 40 percent tax on the most expensive plans, which have been called “Cadillac” plans. The House bill raises the threshold to plans valued at more than $10,200 for individuals and $27,500 for families. The tax would be imposed starting in 2018. About 8,600 out of the 6.2 million people insured in Massachusetts would be subject to that tax.

New taxes on wealthier residents
The bill adds 0.9 of a percentage point to the Medicare payroll tax for individuals with earned income above $200,000 and for couples making above $250,000, and imposes a new 3.8 percent tax on investment income of people in those brackets, starting in 2013. In Massachusetts, about 162,000 households — or 7 percent of the state — make above $200,000, according to 2008 Census data.

Tanning salon tax
The bill has a 10 percent excise tax on tanning services. It is unclear how many facilities there are, because they are not required to register with Massachusetts.

Cuts to Medicare Advantage
The measure makes significant cuts to plans under a program called Medicare Advantage, which are offered through insurance companies and provide extra benefits. The cuts could prompt insurers to stop offering many of the plans or reduce benefits, and many elderly people are expected to switch to traditional Medicare fee-for-service coverage. There are about 198,000 Massachusetts residents enrolled in Medicare Advantage.

Eliminating the Medicare ‘doughnut hole’
The bill would close a coverage gap for Medicare prescription drug plans. Currently, Medicare covers costs up to about $2,700, and it starts paying again after total costs exceed $6,200. The gap in the middle would be closed by 2020. About 80,700 Massachusetts seniors would be affected.

Extended family coverage for young adults
The proposed law would allow children to stay on their parents’ health plans until they turn 26. In Massachusetts, dependents can stay on their parents’ plan for two years after the loss of dependent status under the IRS, or until age 26, whichever comes first.

Biotechnology companies
The legislation gives biotech firms, including Massachusetts companies such as Genzyme Corp. and Biogen Idec Inc., exclusive use of their patents for a dozen years. The bill also includes a therapeutic discovery tax credit, capped at $1 billion nationally, for life sciences companies with 250 or fewer employees. Such companies, including Massachusetts biotech start-ups, would be eligible for tax credits of up to 50 percent for drug development efforts in 2009 and 2010.

New fees imposed on medical device manufacturers
The bill imposes a 2.3 percent excise tax on medical devices, beginning in 2013. It has been opposed by the makers, including Boston Scientific Corp. and Covidien, which have argued that the tax would add to health care costs and would force companies to cut back on research and development.

Preexisting conditions
The measure would prohibit insurance companies from denying coverage because of a preexisting condition. Within six months, the prohibition would apply to children. It would kick in for adults in 2014.

Immigrants
Under current federal law, legal immigrants — generally those here less than five years — are barred from federally-funded health coverage. Currently, Massachusetts provides subsidized health insurance to these legal immigrants but does not receive any federal funds for this coverage. Budget shortfalls prompted legislators last year to significantly scale back the immigrants’ coverage, sparking a lawsuit by advocates who say that is unequal treatment under the law. Starting in 2014 under the federal plan, Massachusetts would get federal funds to cover this group of immigrants. Immigrants in the country illegally would not qualify for coverage.

Hospitals and doctors
The health care package would bring less immediate change to hospitals and health care providers in Massachusetts than those in other states because the state’s 2006 law already brought most uninsured residents onto insurance rolls.

SOURCES: Offices of Senator John Kerry, Representative Edward Markey, Governor Deval Patrick; US Census; The Massachusetts Health Connector; Community Catalyst; BIO; MassMedic; and the Massachusetts Hospital Association

COMPILED BY: Matt Viser, Susan Milligan, Kay Lazar, and Robert Weisman