A New Plan for Covering the Uninsured
A Massachusetts law is expected to help low-income families get health insurance. But there's still a lot of work to be done to lower the cost of coverage for all the state's residents.
By Kimberly Lankford, Contributing Editor, Kiplinger's Personal Finance
April 24, 2006
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The new Massachusetts health insurance plan, signed by Governor Mitt Romney on April 12, is being hailed as a groundbreaking solution to the health-care mess, which has been confounding federal and state legislators throughout the country for years. It's one of the rare times that lawmakers on both sides of the aisle have come together to support a health-care plan -- passing the state's House of Representatives by 154-2 and 37-0 in the state Senate.
The new law aims to reduce the number of uninsured people in Massachusetts (now more than 500,000) by about 90% over the next three years.
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Residents earning less than 300% of the poverty level (about $48,000 for a family of three) will receive government subsidies to cover all or part of the cost of insurance. Plus, a new entity, the Commonwealth Care Health Insurance Connector, will enable many individuals to purchase health insurance with pre-tax money -- just like employees can do now -- and is supposed to offer low-cost plans.
Residents who don't have insurance by July 2007 will have to pay a penalty equaling half the cost of health insurance. The original bill required employers with more than ten full-time workers to pay a $295 penalty per employee if they didn't offer or contribute to their employees' health insurance costs. Governor Romney did veto the employer assessment, but Salvatore DiMasi, speaker of the Massachusetts House of Representatives, expects the House to override the veto early next week, and the Senate may follow suit soon.
Who benefits
The new program will provide plenty of benefits to low-income residents. "This bill at the minimum will result in the expansion of affordable coverage to hundreds of thousands of people in Massachusetts," says John McDonough, executive director of Health Care for All, an alliance of consumers, physicians, hospitals and businesses that has been pushing for health reform in the state for years.
But there's still a lot of work to be done. "We are absolutely not referring to this as universal health care," says McDonough. "We may call it that in three to five years. Whether it's the biggest change, no one knows yet." McDonough is a veteran of the health reform efforts in the state, serving in the Massachusetts legislature for 13 years and as lead legislator in the state's last round of health-care reform laws in 1996.
Middle-income people still may face challenges because Massachusetts has some of the most expensive individual insurance costs in the country. A family of four in Boston currently pay at least $865 per month -- that's more than $10,000 per year -- for a policy with a $2,000 family deductible and 20% coinsurance, according to a recent study by eHealthInsuarnce.com. A family in Des Moines would pay $194 per month for a similar policy, and a family in Baltimore would pay $231.
Individuals in Massachusetts now pay between $350 to $500 per month for coverage, says Julie Jennings, a health insurance broker in Dartmouth, Mass., and president of the Massachusetts Association of Health Underwriters.
Governor Romney and state officials have talked about creating health plans that cost individuals $200 per month, but there's quite a way to go.
"Neither the administration nor any insurer has been willing to come forward with an analysis and details about what these so-called low-cost plans would look like," says McDonough. "We're not holding our breath waiting for these plans to emerge. We expect the final plans will be somewhere between $300 and $400 per month. We'll see."
However, several provisions of the new law should help lower the cost of coverage a bit. Self-employed people, part-time workers and people who work for small companies will be able to buy coverage with pre-tax dollars through the Commonwealth Health Insurance Connector (like people with employee coverage can do now), which could effectively reduce the price by 25% for people who don't currently get those tax benefits.
The law also lets insurers create special products for 19- to 26-year-olds who have smaller networks and aren't subject to all of the same rules as other plans -- enabling them to lower their costs. It also lets children stay on their parents' plans until age 25 or until they lose their dependent status, whichever comes first.