The Connector Board meets Tuesday, April 3, at 2:00 pm (1 Ashburton, 21st floor) to begin discussing the next big issue on the health reform agenda: affordability.

Under chapter 58, the Board must prepare a schedule that set forth what is “affordable” for Massachusetts residents. The schedule determines the “percentage of income which an individual could be expected to contribute towards the purchase of health insurance coverage.” This schedule then guides enforcement of the individual mandate, the requirement that adults have insurance coverage if it is deemed affordable.

In preparation for the debate, the Connector has distributed a large number of documents. Here is a sampling:

• a summary of the statutory provisions governing the individual mandate.
• a discussion of the administrative challenges faced in administering the mandate. The Department of Revenue, which enforces the mandate and collects penalties, will have many unique issues to sort out to make administration work. The tension between administrative simplicity and a fair, equitable system is a central conflict in coming up with an affordability policy.
• a memo from the Board’s actuarial consultant on risk selection issues. According to this analysis, based on a number of assumptions, without a mandate on those eligible for Commonwealth Care, 62% of the eligible population would enroll in the program. Those enrolling would be more likely to be sicker, and would thus use more health services, increasing the average cost per person of the program. The average cost increase compared to a mandate that forced 90% of those eligible to enroll would be 17.5% of premiums. However, what the analysis doesn’t look at is whether total costs to the Connector would increase substantially. Because Commonwealth Care is heavily subsidized, the loss of enrollee premiums from low-utilizers may not take away much from the total revenue in any case.
• a spreadsheet showing the distribution of income among tax filers in Massachusetts, and another spreadsheet showing the savings if health coverage is paid for on a pre-tax basis. The difference is substantial, but pre-tax “section 125″ plans will not available to everyone. For example, firms with fewer than 11 workers are not required to set-up the plans.
• A detailed analysis of individual mandate affordability by Jon Gruber, an MIT economist and member of the board. Gruber finds that most low-income people have sufficient income after paying for necessities to afford current Commonwealth Care premiums. Those with higher income can afford the lowest-level MCC plans. This conclusion directly contradicts the findings of GBIO’s survey, and Gruber discusses at length why his approach is more valid.

Also distributed to board members was a summary of the GBIO affordability report (summary and full report available here), and a paper done by Urban Institute researchers for the Blue Cross Blue Shield Foundation.

What Do We Think
The ACT!! Coalition’s position was not distributed to the Board (they distributed our principles from last year). That position is reflected in our legislation and a statement we distributed to Board members and staff two weeks ago. We also released our position to the press.

For low and moderate income people, below 400% of the poverty line, we believe that penalties should not be imposed on people who cannot find coverage for less than 5% of their income, including deductibles. The standard for people with incomes below 400% of poverty should be reduced on a sliding scale, so that people at the poverty line are not penalized for an inability to afford to coverage. The sliding scale should be extended upward as well, ending at 8% of income for those with incomes at 600% fpl.

We strongly believe this proposal represents a fair and equitable standard. Just as employer requirements are being phased in, so should the imposition of penalties on individuals. Our goal should be expanding coverage, not penalizing low income people who will buy coverage if it is affordable in their situation. Tighter requirements will only lead to massive requests for individual exemptions, and a backlash that could threaten the statute.

The 5% limit corresponds to the one guidepost contained in the statute. The law requires the Connector to consider contribution limits set for other governmental programs. When chapter 58 was passed, legislative staff informed us that what they had in mind was the 5% limit on premiums and out-of-pocket spending set in the SCHIP program. State SCHIP programs go up to 400% of poverty.

Stay tuned, as this will be the historic debate of the health reform implementation process.