Embargoed Until:
October 28, 2008
10:00 a.m. Eastern Time



Christopher Fleming

Public Health Insurance Subsidies In Massachusetts Are Not Crowding Out Employer-Sponsored Coverage

Landmark Reforms In Bay State Are Rated Positively By Businesses And Public, But Support Is Lagging Among Some Groups Directly Affected By Reforms

Bethesda, MD -- New public subsidies for health insurance in Massachusetts, enacted as part of the commonwealth's landmark health reform and coverage expansion, have not caused businesses in the Bay State to drop coverage for their employees.

This failure of public spending to "crowd out" private coverage is among the findings reported in three articles on the Massachusetts reforms published today on the Health Affairs Web site. The articles report results from wide-ranging surveys of businesses, workers, and the public in Massachusetts. http://content.healthaffairs.org/cgi/content/full/hlthaff.27.6.w556/DC2

Based on surveys of Massachusetts employers, a group of researchers led by Jon Gabel of NORC at the University of Chicago reports that 79 percent of companies in Massachusetts with three or more workers offered health coverage to their employees in spring 2008, up from 73 percent in spring 2007. By contrast, the percentage of firms nationwide offering coverage was statistically unchanged over this period. Massachusetts firms were also less likely than firms nationwide to indicate plans to drop coverage or restrict eligibility in the future. http://content.healthaffairs.org/cgi/content/abstract/hlthaff.27.6.w566

In a second article based on surveys of Massachusetts working-age adults, Sharon Long and Paul Masi of the Urban Institute report that the share of workers in firms of any size offering coverage stayed constant at 90 percent between fall 2006 and fall 2007. Long and Masi found no indications that employers were tightening eligibility for coverage: They saw no decline in coverage offers for part-time workers or workers who had been with the employers for less than one year. http://content.healthaffairs.org/cgi/content/abstract/hlthaff.27.6.w576

In a third article on the Massachusetts reforms published today by Health Affairs, Harvard's Robert Blendon and coauthors say that public support for the Massachusetts reforms remains high, even for the reforms' most controversial provision, the "individual mandate" requiring that Massachusetts residents purchase health insurance if "affordable" coverage is available. According to Blendon and his colleagues, 69 percent of Massachusetts residents support the reforms, up from 61 percent in 2006. Support for the individual mandate has increased from 52 percent in 2006 to 58 percent in 2008. http://content.healthaffairs.org/cgi/content/abstract/hlthaff.27.6.w556

The Massachusetts reforms, enacted in April 2006, included an expansion of the Massachusetts Medicaid program, MassHealth; the creation of new income-related state subsidies for the purchase of health insurance, Commonwealth Care; the creation of a new purchasing arrangement for private health insurance, Commonwealth Choice, via the Commonwealth Connector; an "individual mandate" requiring that state residents purchase "creditable" health insurance if "affordable" coverage is available; a "play or pay" requirement that employers with more than ten workers either contribute to their employees' coverage or pay a "fair share" contribution into a state fund; a requirement that all firms with more than ten workers establish a so-called Section 125 plan enabling workers to pay health insurance premiums with pretax dollars; and a consolidation of the individual and small-group private insurance markets.

Employers Continue To Provide Coverage And Support Reforms. In their article, Gabel and his colleagues ask: "Why might coverage be expanding in the face of seeming incentives for some firms to drop coverage and allow Commonwealth Care to pay for the coverage of workers earning less than 300 percent of poverty?" One likely answer, they say, is the individual mandate. "Employers know that employees will need to pay for coverage out of pocket if the employer does not offer it, thereby giving individuals a strong incentive to find an employer that offers health benefits. This may prompt employers to maintain coverage or to offer it for the first time." Gabel's team found that half of all employers that had to pay the "fair share" contribution because they are not offering coverage in 2008 plan to offer coverage next year.

The research by Gabel and his coauthors also indicates that about six months after employers became subject to the play-or-pay requirement of the Massachusetts legislation, a clear majority of employers feel that "overall, the health care reform plan has been good for Massachusetts." Indeed, about half of all employers continue to think that firms with ten with or fewer workers should be subject to the play-or-pay requirement.

Gabel's team did uncover some areas of concern. For example, they found that many firms were not aware of the requirement that they offer a Section 125 plan, and that more than 90 percent of companies who were not aware of this mandate did not offer such a plan. In addition, more than six in ten companies not offering coverage reported that they did not have to pay their fair-share contribution as required. Finally, 45 percent of firms with more than 1,000 workers reported a requirement that they list all employees declining coverage and Section 125 benefits was "very burdensome." The authors warn, "Large employers are a financially powerful group with potential political power to stymie reform."

The research by Gabel and coauthors Heidi Whitmore, Jeremy Pickreign, Will Sellheim, and Shova KC of NORC and Valerie Bassett of the Blue Cross Blue Shield of Massachusetts Foundation was supported by the Robert Wood Johnson Foundation and BCBSMaF.

Workers See No Crowd-Out Of Employer Benefits. As noted above, the surveys of working-age adults in Massachusetts analyzed by Long and Masi revealed no evidence that firms were either dropping coverage or tightening eligibility standards for coverage. The two researchers also examined whether firms might be increasing workers' share of premium costs. Specifically, they looked for changes in the share of workers with relatively high premium contributions, which they defined in two levels: either 1.5 or 2.0 times the average premium contribution in Massachusetts, which in 2006 was about $1,000 for individual coverage and $3,100 for family coverage.

Overall, Long and Masi did not find any significant increases in the share of workers with high premium contributions between fall 2006 and fall 2007. In fact, they found some evidence of a decline in the share of workers in small firms (1-50 workers) with premium contributions above 1.5 times the Massachusetts average, but some evidence of an increase in the share of workers in large firms (more than 1000 workers) with premium contributions above 2.0 times the Massachusetts average.

Long and Masi also found no changes in the scope of services covered, the choice of providers offered, or the quality of care available under employer plans, as viewed by workers. Their research was funded by BCBSMaF, the Commonwealth Fund, and the RWJF.

Lessons From Massachusetts On Maintaining Public Support. Blendon and coauthors examine public opinion about the Massachusetts reforms from the beginning of the reform debate in September 2003 through June 2008, two years into implementation. They draw two broad lessons from the overall public support the Massachusetts reforms have enjoyed. First, a hybrid plan, such as that adopted in Massachusetts, "increases public support because nearly everyone gets some element of their preferred approach."

Second, the Massachusetts plan "was designed in a way that a majority of people do not feel threatened by the law--a fear that has hurt past universal coverage efforts." Throughout the period examined by Blendon's team, a majority of Massachusetts residents have said that they thought the law has had (or would have) no impact on them personally. However, the researchers caution that by 2008, a number of Massachusetts residents have been affected by the reforms. Moreover, among at least two affected groups--"those who were uninsured at some point during the prior twelve months or who had gotten or changed their insurance as a result of the law"--support for the reforms, and for the individual mandate in particular, significantly lagged support among Massachusetts residents as a whole.

The research by Blendon and Harvard coauthors Tami Buhr, Tara Sussman, and John Benson was supported by BCBSMaF and the Kaiser Family Foundation.

After the embargo lifts, the article by Blendon and coauthors will be available at http://content.healthaffairs.org/cgi/content/abstract/hlthaff.27.6.w556. The article by Gabel and coauthors will be available at http://content.healthaffairs.org/cgi/content/abstract/hlthaff.27.6.w566. The article by Long and Masi will be available at http://content.healthaffairs.org/cgi/content/abstract/hlthaff.27.6.w576.


Health Affairs, published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears bimonthly in print with additional online-only papers published weekly as Health Affairs Web Exclusives at www.healthaffairs.org. The full text of each Health Affairs Web Exclusive is available free of charge to all Web site visitors for a two-week period following posting, after which it will switch to pay-per-view for nonsubscribers. Web Exclusives are supported in part by a grant from the Commonwealth Fund.


©2008 Project HOPE–The People-to-People Health Foundation, Inc.