A unique state program that helps pay most health insurance costs for 27,000 unemployed Massachusetts residents is on the cusp of going broke, setting off a debate between healthcare advocates and business leaders who say funding it is a burden on companies fighting for their survival.
“In order to save the program, something has got to be done to get more revenue,’’ said Robb Smith, director of policy and planning at the Massachusetts office of Labor and Workforce Development, which oversees the program.
But business leaders say that keeping the program afloat by hiking the tax on employers – $16.80 per employee, per year – would hit hard on many companies already battered by higher costs across the board.
“At some point we have to take a good look at the economy and employers’ ability to keep the doors open and decide whether we are maybe being too generous,’’ said Jon Hurst, president of the Retailers Association of Massachusetts.
The program’s rate of growth this year has been defying monthly calculations. Enrollment is up 186 percent since last summer, reaching more than 27,000 as of June. Not all of the state’s roughly 250,000 unemployment recipients qualify. The program is geared toward middle-income people who made too much money to qualify for Medicaid and other state-subsidized healthcare programs designed for the poor.
A three-member board meets annually in November to monitor the program’s finances and will probably vote then to make changes, Smith said. No legislative approval is needed to raise or lower the employer tax. While the program had $49.2 million in reserves in June, it spent over $28 million in the most recent quarter. The monthly expenditures surged 70 percent alone from April to June.
“We think we’ll be OK until November, but it’s next year we are really concerned about,’’ Smith said. “With the trends we have now, we will probably run out of money [in January] unless something dramatically changes . . . or unless we see a really quick recovery, which I am not counting on.’’
Traditionally the state program has paid 80 percent of a qualified laid-off worker’s monthly health insurance premium for as long as the worker is collecting unemployment benefits. Because the federal government designated stimulus money earlier this year toward health insurance for the unemployed, most recipients are paying about 9 percent of their monthly premium. For those who can’t afford to keep their previous insurance, even with the subsidies, the state program provides basic health coverage and charges recipients modest copayments of about $15 for a doctor’s visit.
For Weymouth resident John Phelan, who lost his retail job in January, the prospect of the Medical Security Program going broke is unsettling. It has helped him afford to keep the insurance he had while working, so he pays just under $200 a month.
Launched 19 years ago under the administration of governor Michael S. Dukakis, the Medical Security Program is unique to Massachusetts. Governor Deval Patrick transferred $15 million out of the fund last fall – before unemployment spiked – to help pay for other insurance subsidy programs. The tax on businesses to fund the program has not been raised since it was created.
But business leaders said it’s time to abolish this program, given the state’s 2006 overhaul of the health insurance system. That revamp included the creation of another insurance program to help lower-income residents afford coverage. It is run by a different state agency than the Medical Security Program, has different eligibility requirements, different rules, and a different target: the chronically poor.
“It doesn’t make sense to be running two separate programs with two administrative departments,’’ said Rick Lord, president of Associated Industries of Massachusetts, the state’s largest business trade group.
Lord said officials should merge the two programs, instead of hiking the tax on employers, and subsidize both programs from the state’s general fund. The Medical Security Program is the only state insurance program funded by a tax on employers.
Smith, the state director, said officials are considering some form of merger, but are unlikely to get rid of the tax on employers.
“We will be unveiling reforms in the fall to help make the system more integrated,’’ he said, while declining to provide details.
Other business leaders said officials should consider lowering benefits in the Medical Security Program, as it has done during other recessions.
“There’s probably not a worse tax the state could do now on businesses,’’ said Bill Vernon, state director the National Federation of Independent Business, which primarily represents smaller companies.
Smith said lowering benefits is not a legal option without renegotiating agreements with the federal government.
Unlike other state-run health insurance that is geared to lower-income residents, the Medical Security Program is open to people who have been making substantially higher salaries. Eligibility is calculated by adding a family’s income for the six months prior to an applicant’s unemployment to projected income for the next six months. The total annual income can not exceed 400 percent of the federal poverty level, which translates to as much as $88,200 for a family of four.
As business and state leaders debate the future of the unusual program, Health Care for All, a large consumer group, says the lifeline needs to be resuscitated and asking businesses to pay more is reasonable.
“The tax on employers hasn’t gone up since 1990,’’ said Brian Rosman, the group’s research director. “We would certainly support examining the employer tax, to bring it in line with increased costs since then.’’
Kay Lazar can be reached at klazar@globe.com
“
