Legislative Update: New Massachusetts Penalty Regulating Employer Contributions

Here is another piece of legislation we want to share with you about the Massachusetts penalty as it pertains to employer contributions to health care.

On August 1, 2017, Massachusetts Governor signed into law H. 3822, “An Act Further Regulating Employer Contributions to Health Care.” The Act will temporarily increase current employer fees and impose new penalty fees on employers, which will help finance the Commonwealth’s Medicaid and CHIP Programs, known as MassHealth. The Act will be applicable beginning January 1, 2018 sunset on December 31, 2019.

The Act significantly affects Massachusetts employers with more than five (5) employees in the following ways:

1. Increases the required Employer Medical Assistance Contribution (EMAC) to annual maximum of $77 per employee (from $51 per employee). Employers with an average of six (6) or more employees working in Massachusetts per quarter are required to make EMAC contributions, regardless of whether the employer offers health coverage to its employees. Newly-eligible employers follow a phased-in schedule.
2. Imposes an additional fee (EMAC Supplement) of up to $750 (5% of annual wages) for each non-disabled employee who receives health coverage through MassHealth or opts out of employer coverage and receives subsidized coverage through the Marketplace (ConnectorCare).
3. The taxable wage base for both the increased EMAC contribution and the penalty fees remain at $15,000. The Act’s new fees will be offset by a two-year decrease in employer state unemployment insurance (SUI) rates in the future. The unemployment insurance relief is estimated to save employers $334 million over the next two years.

Employers have several avenues for reducing exposure to an EMAC Supplement penalty. In general, employees earning in excess of 138% of the FPL ($16,642 for an individual in 2017) are not eligible for MassHealth, and those earning over 300% of the FPL ($36,180 for an individual in 2017) are not eligible for ConnectorCare. Employees eligible for affordable, comprehensive health insurance from their employer also are not eligible for ConnectorCare, and employees who receive MassHealth premium assistance toward their employer’s group health plan do not trigger an EMAC Supplement. Now that proposed regulations have been released, employers can better assess their exposure to an EMAC Supplement and begin to budget for it or make other eligibility or contribution changes.

Because Massachusetts employers already pay the EMAC and the Department of Unemployment Assistance (DUA) will calculate the supplement, administration of these fees should not be unduly burdensome. Nevertheless, affected employers will need to budget for the higher EMAC fee and the EMAC supplement, although it might be difficult to predict the supplement’s cost without knowing whether employees are enrolled in MassHealth or ConnectorCare. Employers will also need to review the employee information provided by the DUA for the accuracy and appeal any incorrect assessments.

In addition, on November 3, 2017, Governor Baker signed into law a supplemental budget bill (Chapter 110 of the Acts of 2017) which includes a requirement that employers file a healthcare coverage form beginning in 2018. Employers with six (6) or more employees working in Massachusetts will be required to prepare and file this form, referred to as the “healthcare coverage form.” The form must be submitted under oath annually and must disclose whether the employer has offered to pay or arrange for the purchase of health care insurance for its employees. If coverage is offered, the employer must provide information as to premium costs, the benefits offered, cost sharing details, eligibility criteria and other relevant information. Employers who knowingly falsify information or fail to comply face penalties of $1,000 up to $5,000 for each violation.

We will continue to keep an eye on any and all things that could affect your business. Please continue to check the NARFA blog for legislative news and much more.

If you would like to learn more about our employee benefits programs, please contact us today. For almost 90 years NARFA has provided best-in-class service, programs, and much more to our member businesses. See for yourself how NARFA “power in numbers” can help keep your business strong and stable.