BOSTON - Massachusetts' statewide healthcare reform is expected to have spillover cost consequences on small businesses, according to a Thursday report released by the Center for Studying Health System Change (HSC).
The state's landmark reform plan, intended to reach nearly universal healthcare coverage for its residents, is hampered by affordability of coverage, the HSC study said.
"Despite reforms of the individual and small-group health insurance markets, including development of new insurance products, concerns remain about the affordability of coverage and the ability to stem rising health care costs," said Paul B. Ginsburg, Ph.D., president of HSC.
The study, titled Massachusetts Health Reform: Employers, Lower-Wage Workers and Universal Coverage, was based on interviews with about 25 market observers in January 2007, including representatives of employer groups, state agencies, health plans, providers, advocates and other health care leaders knowledgeable about the reform.
All employers, except firms with fewer than 11 workers, face new requirements under the 2006 Massachusetts law to create plans that allow workers to purchase insurance with pre-tax dollars. Employers face paying a $295 annual fee if they do not make a "fair and reasonable" contribution to the cost of workers' coverage.
Market observers believe many small firms may be unaware of the law's requirements, according to the study. The largest impact on small employers is expected to come from the individual mandate for all residents to have health insurance, HSC researchers said. The individual mandate could have spillover consequences for employers if more workers take up coverage offers, seek more generous coverage or pressure employers to offer coverage.
Because state residents will face tax penalties for going without health insurance, observers predicted that employers that do not offer coverage might become less attractive to workers. Moreover, while the direct employer requirements are targeted at firms with 11 or more employees, the individual mandate applies to all residents, so it is likely to affect employers more broadly.
"Workers who now decline coverage offered by their employers may choose to participate because of the individual mandate, raising costs for employers," said HSC researcher Laurie Felland, M.S., a study co-author.
While most market observers agreed that the primary goal of the reform is to improve access to health insurance, they contended that its ultimate success depends on affordability, both in the short term, as well as the long term. If affordable coverage is not available, it is unlikely that small employers on the cusp of offering insurance to their workers will be motivated to do so, according to the study. Instead, employers are more likely to pay the $295 annual fee rather than incur the greater costs of offering insurance.
Despite the mandate requiring individuals to have health insurance, experts say many are likely to forgo coverage and pay the tax penalty.
Penalties for individuals who remain uninsured are relatively small this year. In 2008, the financial penalties for individuals opting out of coverage are expected to be more substantial, HSC's study said. Consequently, it is unlikely that the first year of the reform will provide answers to key questions about the individual mandate, researchers concluded.
Since small employers have already renewed coverage for 2008, it will be some time before more is known about the effects on small business economy. HSC will continue to track the reform's impact in 2008, it said.