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June 6, 2006

Council urges Senate to reject new health-insurance mandates, explore Massachusetts' innovation instead

State legislators should reject new health-insurance mandate bills that would create huge increases in employers' taxes and health insurance costs, and instead explore the potential in the health-insurance policy innovation recently approved in Massachusetts, The Business Council's health-policy specialist said in legislative testimony today.

"The policy choices in Massachusetts hold promise, especially since the political leadership negotiated a set of policy choices that could garner the support of both sides of the aisle and from groups representing diverse interests," Elliott Shaw, director of government affairs said in June 6 testimony before the state Senate Standing Committee on Health and Insurance.

This promising beginning of policy innovation in the Bay State stands in sharp contrast to the controversial new mandate bills, which unions and affiliated organizations are pressuring Albany to consider, Shaw said.

"The health insurance mandate bills in Albany put off the honest, hard choices yet again, in favor of a so-called "cure" that would surely prove worse than the disease," Shaw testified. These bills would punish employers for whom health insurance has become to costly by forcing them to buy it anyhow or imposing "a ruinous tax."

"This idea isn't fair—not to employers, and not to the employees whose employers will no longer be able to afford their salaries," Shaw said. "And it doesn't "share" the burden of resolving New York's out-of-control health-care costs. It simply searches for a new set of payors to pour more money into the system."

Noting that "New York has careened from one health-care crisis to the next the past few years," Shaw urged Albany to break its recent pattern of health-policy changes that have been little more than "a series of patches, one-shots, give-aways and shifts of responsibility from one taxpayer pocket to the other."

Nonetheless, he added, "New York continues to pay the price in higher Medicaid costs, excess hospital capacity and public health measures that are frequently no higher than average and, too frequently, below average. Wide variations in quality are evident, and New York's hospitals continue to have higher lengths of stay, unnecessarily consuming excess resources."

Shaw said the Massachusetts law revolutionizing health insurance there is an intriguing mix of "shared responsibility of government, the business community, individuals, health-care providers, and insurers in financing health-care." The law was enacted earlier this year with broad support from health-insurance providers, businesses, advocacy groups that generally support higher health-care spending, taxpayer groups, and political leadership on all sides of the political spectrum."

The new Massachusetts law requires individuals to buy health insurance coverage, imposes a new assessment on some businesses that offer no health insurance benefits, and creates a new entity called a health insurance "connector" to link individuals and businesses with a range of health insurance products.

The program requires individual residents of Massachusetts to obtain health insurance. Beginning in July 2007, all adults must get and keep health coverage if an affordable product is available or lose their personal income tax exemption. In July 2008, those who fail to comply will be charged up to half of the cost of the minimum insurance premium for each uncovered month.

Employers will have increased responsibility to offer some health insurance benefits. Beginning in October 2006, employers with 11 or more full-time equivalents who don't contribute to their employees' health insurance will pay an annual assessment of $295 per employee. Beginning in January 2007, those employers will be required to offer a "Section 125" plan to their employees. This refers to Section 125 of the federal Internal Revenue Code, which allows employees to put pre-tax dollars into accounts from which they can pay health-care and / or child-care expenses.

The new "connector" will help employers and individuals offer and buy health insurance. This quasi-public agency will facilitate the administration and purchase of insurance. Small businesses will be able to offer multiple, affordable health insurance products. Premiums will be paid with pre-tax dollars, and minimum participation and contribution thresholds will be eliminated.

To help control costs, the plan eliminates the state's uncompensated care pool and replaces it with a fund that will compensate hospitals on a standard fee schedule as opposed to the current charge-based system.

"We will continue to speak-up for sensible policies to make New York's health-care system less costly for taxpayers and employers and we will continue to champion sound solutions to give employers more affordable health insurance options," the testimony concludes. "The mandate bills do neither, unfortunately, and we hope you lay them aside for a more comprehensive exchange on the ills of the state's health-care system."

Shaw reminded legislators at the Council and 61 other business organizations around the state recently urged state lawmakers to reject any new health-insurance mandate. That recommendation was part of New York's business community's "Action for Jobs '06" agenda.

Also on Thursday, the state's small but influential Conservative Party sent state legislators a letter urging them to reject the new health-insurance mandate.