Under Massachusetts health care reform, employers with 11 or more full-time equivalent employees are required to make a ‘fair and reasonable’ premium contribution toward the cost of their employees’ health insurance or be subject to pay a ‘fair share’ assessment to the state.
The Mass. Division of Health Care Finance and Policy (DHCFP) has announced the adoption of revisions to the Fair Share Contribution (FSC) regulation (114.5 CMR 16.00) effective October 1, 2009. The approved amendments include technical changes to clarify the compliance standards of the FSC requirement. Although the adopted changes to the regulation are relatively minor, three notable revisions to the FSC compliance standards have been adopted:
- Removal of the Majority of Time Rule. The prior version of the regulation stated that, in calculating the percentage of full-time employees enrolled, employees who worked both part-time and full-time during a quarter should be classified based on which capacity the employee worked in for the majority of his or her time. The revised regulation deletes this provision. The regulation now directs employers to identify and record the number of full-time employees enrolled, and the number on the employer’s payroll, on the last day of the quarter.A conservative approach would be to include employees as FT for FSC purposes if they worked 35+ hours during the week inclusive of the end of quarter snapshot date. This approach will increase the number of FT employees included in the denominator of the FSC ratio without a corresponding increase in the number of enrolled FT employees in the numerator; thereby diluting/decreasing the take-up rate. This may not be a problem for large employers with stable employment and high enrollment rates. However, such an approach could be problematic for smaller employers and those without stable employment and/or low enrollment rates.Less conservative approaches may include (a) treating employees as FT for FSC purposes only if the number of weeks they worked 35+ hours in the quarter made them eligible for the employer’s FT health benefit as of the end of quarter snapshot date or (b) averaging the number of hours worked for the quarter.
- Group Health Plan Documentation Requirement. This requires a contributing employer to maintain documentation about its group health plan, including a written plan description for each plan and copies of an employee handbook or other written communication to employees about the plan(s) offered. These documents should contain information on benefits, eligibility (including the minimum number of hours that the employers requires for an employee to be eligible for full-time benefits) and premium contributions. The written plan description should have evidence that the plan was in place during the quarter under review.According to the new requirements, “a contributing employer must maintain documentation about its group health plan and premium contributions including, but not limited to, the following:
- a written plan description for each plan, including a description of benefits, eligibility requirements, and the amount of employer contribution
- evidence that the plan was in place during the quarter for which eligibility is determined; and
- copies of the employee handbook or other written communications to employees about the plan or plans, including plan benefits, eligibility requirements and the employer contributions.”
- Premium Reimbursement Arrangements. These arrangements are now recognized as Group Health Plans under the regulation, provided there is written plan documentation that designates specific insurance plan(s) for use by employees. A PRA may qualify as a group health plan for FSC testing purposes only if the employer:
- designates in writing a specific insurance plan or plans for employee enrollments,
- communicates such designation, in writing, to its employees; and
- otherwise meets the written group health plan documentation criteria in the regulation.
PRAs may help some smaller employers who need only pass one FSC test to pass the Premium Contribution Standard. PRAs will not be a factor for larger employers that must pass both FSC tests (25+% enrollment rate and 33+% contribution rate).
Employers should make sure they are in compliance with these new regulations which are now in effect. Please contact us for information or assistance.
Click here to download the regulations.