HYANNIS — A new supplemental state fee assessed to employers for workers receiving health insurance through MassHealth or the Massachusetts Health Connector is hitting small businesses and nonprofit organizations hard.
But state Sen. Julian Cyr, D-Truro, hopes to get them some relief through an amendment to the state’s fiscal year 2019 budget that would offer a hardship exemption to the surcharge.
The Employer Medical Assistance Contribution supplement, proposed by Gov. Charlie Baker in 2017, went into effect Jan. 1.
The supplement was enacted as a way to offset costs of state-subsidized health plans, which have experienced significant increases in enrollment and operating costs in the past decade.
The per-employee fee for those choosing to subscribe to one of the plans will now cost up to $750 per year — calculated as 5 percent up to a wage cap of $15,000 — and is billed quarterly to employers by the state Department of Unemployment Assistance. The supplemental fee is in addition to a $77 employer contribution fee — increased this year from $51 — already paid per employee, regardless of insurance plan, to help pay for the state-subsidized plans.
Cyr’s amendment, which was debated and passed by the Senate, would require the Department of Unemployment Assistance to establish a hardship waiver for the medical assistance contribution for certain employers, including small businesses, seasonal businesses and nonprofit organizations. The waiver could reduce or fully exempt the employer of the liability.
The unpredictable quarterly expense — payable in 30 days or fewer — is proving to be especially devastating to small businesses and nonprofit groups, which can have variable income streams or are funded by donations, grants or state contracts.
“To me, this policy is out of touch with the realities of what it takes to run a small business or nonprofit entity,” Cyr said. “To be slapped with a huge bill that has to be paid quickly is out of touch.”
Alden Bianchi, practice group leader of the Employee Benefits & Executive Compensation Practice at the Boston-based law firm Mintz Levin, said he was “stunned” when he saw the supplement bill received by one of his clients.
“This is one of the more frustrating issues to come along in a long time,” said Bianchi, who referred to the Cyr amendment as good-intentioned. “I don’t see a solution, other than a graduated EMAC supplement where large employers pay more. It’s a zero-sum game. The money has to come from somewhere to pay for the programs.”
Cape Abilities, a Hyannis-based nonprofit disability services agency, received an unbudgeted expense bill for $26,000 in April for its first-quarter assessment.
“I get it,” said Rosalie Edes, president and executive officer of Cape Abilities. “The governor is trying to do what he needs to do to cover MassHealth costs, but it’s a burden to nonprofits.”
Cape Abilities already pays $1.3 million per year to offer employees health care coverage, but those with low incomes can qualify for MassHealth, while some opt for competitively priced offerings from the Health Connector, according to Edes.
“We are trying to do the best we can (with health care coverage), and then we have an additional charge when employees access benefits they are eligible for,” she said. “It really is a hardship.”
Broad Reach Healthcare, which operates rehabilitation, assisted-living and long-term-care facilities in Chatham, received a $13,000 bill for supplemental medical contribution fees in the first quarter.
“It came without warning as far as the amount was concerned,” said William Bogdanovich, Broad Reach president and CEO, who had less than two weeks to pay the bill. “We didn’t know what to expect.”
Businesses such as nursing homes are dependent on MassHealth for the majority of patients in their care. Returning money to MassHealth in the form of a supplemental fee amounts to a backdoor rate cut, according to Bogdanovich.
“The concept of the surcharge was initially supposed to target employers who weren’t doing their part in offering adequate health care plans, but it proved to be much different,” he said. “We offer plans that meet the requirements, but we can’t force somebody to take it.”
Mintz Levin’s Bianchi agrees with Bogdanovich.
“Any employer in the state that offers major medical coverage that is affordable should not be assessed an EMAC supplement charge,” he said. ” I think it’s wrong for penalizing employers for doing the right thing with affordable coverage.”
Cyr’s amendment now goes before a Senate and House conference committee on Beacon Hill. The committee will determine if the amendment makes the final state budget, which is expected to be released later this month.
“This would alleviate a tremendous burden on employers,” Cyr said.
—Follow Geoff Spillane on Twitter: @GSpillaneCCT.