Introduction

An Act Providing Access to Affordable, Quality, Accountable Health Care, more commonly known as Chapter 58, became law in the state of Massachusetts on April 12, 2006 (It was the 58^th law passed in Massachusetts in 2006, thus it is Chapter 58 of the Acts of 2006). The law creates a system of shared responsibility for employers, the government and individuals, with the goal of insuring nearly all residents of Massachusetts. It is being implemented primarily by a new state authority called the Commonwealth Health Insurance Connector Authority (Connector Authority). This paper will summarize the reasons for the adoption of the law, describe the law itself, consider the challenges of implementing the law, and discuss the lessons that Massachusetts' experience may hold for reform in other states and on the national level.

Rationale for State-level Health Insurance Reform

The United States' health insurance system is in a state of crisis. The number of uninsured persons in the United States has risen from 40 million in 2000 to 46 million in 2005 (Kaiser Family Foundation [KFF], 2006b). Uninsured persons tend to be working adults in low-income families (KFF, 2006b). They are disproportionately likely to lack college educations and to be members of minority populations (KFF, 2006b). Uninsured persons receive less medical care and experience worse health outcomes than insured persons (Hadley, 2007; KFF, 2006b).

The Bush Administration's major responses to the problem have been to encourage the use of health savings accounts and to improve the portability of health insurance (Rovner, 2006). Although these measures have helped some individuals, the number of uninsured persons continues to grow, increasing by 1.3 million over the course of one recent year (KFF, 2006b). Unsatisfied with the federal response, some states have decided to act on their own to expand health insurance coverage. After three years of planning and negotiations, Massachusetts adopted the especially expansive reforms included in Chapter 58 (Affordable Care Today Coalition, 2006).

Meanwhile, other states also have adopted reforms. Maryland passed a law requiring extremely large employers to spend eight percent of their payroll on health insurance (Wagner & Barbaro, 2005). Illinois adopted a plan to insure all children in the state (Davey, 2005). And in California, governor Schwarzenegger proposed a plan that copied and expanded upon the Massachusetts reform (California Office of the Governor, 2007). Of these states, Massachusetts has achieved the highest rate of insurance coverage, having already enrolled over 169,000 of the state's 372,000 previously uninsured persons (Raymond, 2007Day, 2007a; Day, 2007b; MassHealth, 2007).

Massachusetts' successful expansion of health insurance coverage for its residents derives largely from the variety of stakeholders involved in passing the law, and their dedication to making the reform work. The state's broad range of highly involved stakeholders means that implementation has been a slow and careful process, as the stakeholders often debate about how the law should be implemented. Overall, the negotiations seem to be worth the effort and delay, as they have created policies that are acceptable to all stakeholders. While no law can be perfect, the compromises have led to major improvements on several fronts, from lowering the cost of private insurance to increasing subsidies for low income individuals. Perhaps more important, without compromise, the law either would not have been passed or would have been quickly undercut. The compromises mean that no stakeholder loses on all fronts and feels that it must protect its interests by trying to demolish the entire reform. As Jon Kingsdale, the executive director of the Connector Authority, said, with this reform “no one is the enemy; everyone is part of the solution.” (Kingsdale, 2007).

The Massachusetts Legislation

Chapter 58 divides responsibility for expanding insurance coverage among employers, the government and individuals, with the goal of insuring nearly all residents of Massachusetts. For a summary of the major provisions of the law see Table 1. Rather than risk getting bogged down in debates about such contentious or complicated topics as affordability standards and actuarial equivalence, which could have delayed or prevented passage of the bill, the legislature reserved many difficult decisions for a new, independent authority called the Commonwealth Health Insurance Connector Authority (An Act Providing Access to Affordable, Quality, Accountable Health Care [Act], Mass. Gen. Laws ch. 176Q (2006)). The Connector Authority is governed by the Connector Board, consisting of ten representatives of groups that have stakes in the reform; its members include the state secretary of Administration and Finance, the executive director of the state Group Insurance Commission, the state director of Medicaid, the commissioner of the state Division of Insurance, a health economist, an actuary, a representative of small business, a representative of a health consumer organization, an employee health benefit specialist and a representative of organized labor (Act, Mass. Gen. Laws ch. 176Q § 2(b) (2006)). While the legislature decided which groups should be represented, the Governor and the Attorney General appointed those board members who do not hold their seats ex-officio (Act, Mass. Gen. Laws ch. 176Q § 2(b) (2006)).

Employer Responsibility

The primary sources of employer responsibility for expanding access to insurance are the “fair share” regulations; so-called because they seek to ensure that employers take their share of responsibility for providing residents of the state with health insurance. These regulations, promulgated by the state Division of Healthcare Finance and Policy, require employers with eleven or more full-time employees either to enroll 25% of their full-time employees in an employer sponsored health insurance policy or to offer to pay 33% of the premiums for an employee group insurance plan (Determination of the Employer Fair Share Contribution, Mass. Regs. Code tit. 114.5, § 16 (2006)). Employers that fail to comply with the regulation are subject to an annual fee of up to $295 per employee (Act, Mass. Gen. Laws ch. 149 § 188(c)(10) (2006)).

Employers with more than ten employees must also offer IRS Section 125 “Cafeteria plans” that allow their employees to purchase insurance with pre-tax income (Act, Mass. Gen. Laws ch. 151F § 2 (2006)). Cafeteria plans are systems that allow employees to choose from among a menu of benefits that they may purchase with pre-tax income. Any employer that fails to provide section 125 plans is at risk for the “free rider” surcharge, such that, if the aggregate cost of state sponsored health care provided to its employees during one year exceeds $50,000, the employer is liable for between 10% and 100% of the cost of that care (Act, Mass. Gen. Laws ch. 118G § 18B(b) (2006)). The size of the actual penalty depends on the number of times the employees used state sponsored care, the size of the employer, and the percentage of its employees for whom the employer provides insurance (Act, Mass. Gen. Laws ch. 118G § 18B(c) (2006)). The free rider surcharge is meant to keep employers from passing on to the state their responsibility for caring for their employees. Finally, an antidiscrimination provision requires employers to offer the same insurance options and premium contributions to all of their full-time employees (Act, Mass. Gen. Laws ch. 175 § 110 (2006), 176A § 8 (2006), 176B § 3B (2006), 176G §6A (2006)).

Subsidized Programs: Commonwealth Care and MassHealth

The state government primarily fulfills its share of responsibility to cover the uninsured via a subsidized health insurance program called Commonwealth Care. Under this program, adults with incomes below 300% of the federal poverty level (FPL) enroll in insurance plans offered by four private insurers, and the state pays a portion of their premiums (Act, Mass. Gen. Laws ch. 118G (2006)). FPL varies with family size. For 2007, FPL is $10,210 for an individual and $20,650 for a family of four (U.S. Department of Health and Human Serivices, 2007). Thus whether an individual is eligible for Commonwealth Care depends in part on the number of persons in her household. Persons whose employers offer insurance that satisfies the fair share regulations are not eligible for Commonwealth Care, but the Connector Board may chose to waive this stipulation (Act, Mass. Gen. Laws ch. 118G (2006)).

The state also took on responsibility for the uninsured when it expanded MassHealth (Medicaid) and restored MassHealth benefits—including vision and dental benefits—that had been cut during a budget crisis in 2002 (2006 Mass. Acts 58 §§ 105, 106, 107). Most prominent among the expansions are increases in the enrollment caps on the programs for the long term unemployed and for individuals with HIV.

Major changes targeted directly toward covering children include increasing the income limit to 300% FPL for families eligible to enroll their children in MassHealth and waiving children's premiums for MassHealth if their parents are enrolled in Commonwealth Care (Act, Mass. Gen. Laws ch. 118E § 9A(2)(c) (2006); Commonwealth of Massachusetts Executive Department, 2007).

The state is paying for Commonwealth Care and the MassHealth expansions by rearranging its healthcare funding structure. The state renegotiated its Medicaid funding with the federal government and received permission to shift funds from its Uncompensated Care Pool to the other programs (Massachusetts Executive Office of Health and Human Services [EOHHS], 2006). The Massachusetts reform includes no new taxes.

Individual Mandate

Chapter 58's individual mandate requires state residents age 18 and over to obtain health insurance. Most residents are expected to enroll in employer sponsored insurance, but if that is unavailable, they must either enter a government sponsored insurance program or buy individual insurance plans. The mandate took effect on July 1, 2007, and anyone without insurance as of December 31, 2007 will face a $219 penalty on his 2007 income taxes (Act, Mass. Gen. Laws ch. 111M §§ 2(a), 2(b) (2006)). In subsequent years, the tax penalty will increase to half the annual premium cost of the least expensive insurance plan available to the individual (Act, Mass. Gen. Laws ch. 111M § 2(b) (2006)). The penalty will be prorated for the number of months the individual lacks insurance, and persons who lose their insurance will have a 63-day grace period to get new insurance without any penalty (Act, Mass. Gen. Laws ch. 111M § 2(b) (2006)).

Those residents of the state for whom no insurance product is affordable will not be penalized for failure to purchase insurance (Act, Mass. Gen. Laws ch. 111M § 2(a) (2006)). Earlier this summer, the Connector Board adopted an affordability schedule for determining who will not be penalized for failure to purchase insurance (Connector, 2007d). In addition, the Connector Authority has published a schedule of the least expensive insurance plans in each region, for use in determining whether an affordable plan is available (Connector, 2007d; Act, Mass. Gen. Laws ch. 176Q § 3(p) (2006)).

To satisfy the individual mandate, insurance plans must meet certain quality requirements (Act, Mass. Gen. Laws ch. 111M §§ 1, 2(a) (2006)). The Connector Board recently adopted a definition of minimum creditable coverage (MCC), the floor below which insurance products will not satisfy the quality requirements (Act, Mass. Gen. Laws ch. 111M § 1 (2006); Act, Mass. Gen. Laws ch. 176Q § 3(s) (2006)). The affordability schedule and MCC are discussed in greater depth later in this paper.

Private Insurance Reforms: Commonwealth Choice and the Market Merger

The state facilitates individual purchases of insurance through a program called Commonwealth Choice. For this program, the Connector Authority coordinates and sells insurance plans administered by private insurers. By consolidating a large number of individual purchasers, Commonwealth Choice spreads risk over a larger pool allowing insurers to reduce the rates they charge consumers, while also providing a convenient, centralized location for individuals to purchase insurance. Individuals and employer groups of less than fifty persons may purchase insurance through Commonwealth Choice (Act, Mass. Gen. Laws ch. 176Q § 4 (2006)).

Massachusetts has also merged its non-group and small group insurance markets. In most states, insurance rates for individuals are calculated in a different way than insurance rates for small groups. Massachusetts' reforms removed this distinction. This will generate a 15% decrease in costs and additional regulatory protections for individual purchasers, with only a 1.5% increase in costs for group purchasers (Massachusetts Merger Project, 2006).

Finally, Massachusetts will make it easier for young adults to obtain insurance, by requiring insurers to let parents include children in their parents' policies until children reach age 26, or until two years after children lose dependent status under the Internal Revenue Code (Act, Mass. Gen. Laws ch. 175 § 108(2)(a)(3) (2006), 176A § 8Z (2006), 176B § 4Z (2006), 176G § 4R (2006)). In addition, insurers will have to market young adult plans, which will be available only to persons between the ages of 19 and 26. The state assumes that 18-year-olds will get coverage through their parents' plans or state programs, so they are not eligible for young adult plans (Act, Mass. Gen. Laws ch. 176J § 10 (2006)). The young adult plans are intended to equalize treatment of college students and other young adults. Previously, college students in Massachusetts were required to have health insurance and could purchase low cost, low benefit plans through their schools, while non-students who wanted insurance had to buy more expensive plans on the open market. Young adult plans are also intended to draw young, healthy persons into the insurance pool. Because younger persons generally generate healthcare costs that are lower than what they contribute in premiums, their presence in the insurance pool is expected to lower premiums for all enrollees.

Challenges of Implementing the Law

Despite the broad range of support for Massachusetts' reform, nearly every aspect of Chapter 58 has generated controversy during the implementation process. To date, however strong and widespread commitment to the success of the reform has ensured that the Connector Board has reached unanimous agreement about how best to carry out most of its duties.

Fair Share Regulations

Employer reaction to “fair share” has been mixed. Employers that currently do not offer insurance argue that the regulations unfairly increase their costs and administrative burdens (McAnneny, 2006). They argue that if they choose to continue doing business in the way they see fit, they will, in effect, face a tax increase because they will have to increase expenditures in the form of penalty fees or insurance premiums, and get no direct benefits in return. Employers that already offer insurance to their employees support the fair share and free rider regulations, on the grounds that the regulations will eliminate the unfair advantage that employers who do not insure their employees gain from reducing operating costs (Edmundson, 2006).

While most consumer groups support the concept behind “fair share,” they have been consistently critical of the details of these regulations. They argue that $295 per employee per year is too small a penalty to influence employer behavior (Wallack and Hollmer, 2006). Advocacy groups also argue that to be exempted, employers should be required to cover more than 25% of workers and pay more than 33% of their premiums (Krasner, 2006). Their argument is made more persuasive by the fact that of the 61% of employers who currently offer insurance, the average employer enrolls 65% of its employees and pays 84% of their premiums (KFF, 2006a). Further, many insurers actually require 50% employee participation and a 50% employer contribution before they will contract with a business (Medplan Access, n.d.).

Employee advocates worried that setting the official standards so much lower than the conventional standards would lead employers to offer insurance to fewer employees, with lower employer contributions, or would encourage insurers to soften their requirements (Edmundson, 2006). These concerns were vindicated when one insurer moved to lower its requirements to match the fair share requirements. Only intervention by the state government prevented the change (Krasner, 2007). Advocates also worry that because the regulations do not set any standards for the quality of the insurance, employers could satisfy the regulations with insurance policies that do not provide adequate protection to employees (Edmundson, 2006).

The legislature refrained from setting quality standards for employer sponsored insurance in part to avoid complaints from the business community, but primarily because quality standards would risk preemption by the federal Employee Retirement Income Security Act (ERISA). ERISA is a 1974 statute designed to protect and standardize employee benefits. It governs a wide range of benefits including health insurance. Unfortunately, ERISA sets very few standards for employer sponsored health insurance benefits, but legally prevents states from filling in the gaps (Butler, 2000).

While ERISA allows states to regulate “the business of insurance,” courts have held that ERISA precludes state laws that dictate the benefits provided by employers. Most recently, the Court of Appeals for the Fourth Circuit struck down Maryland's law that required large employers to contribute eight percent of payroll to health insurance (Retail Industry Leaders Association v. James D. Fielder, 2007). The Massachusetts law is probably safe from ERISA preemption because the $295 penalty is too small to force employers to change their behavior, and the absence of quality standards maintains employers' freedom to offer whichever insurance plans they choose (Butler, 2007). The “fair share” regulations attempt to walk a fine line between encouraging employers to offer insurance and running afoul of ERISA.

Commonwealth Care Enrollee Contributions

For Commonwealth Care, Chapter 58 states that persons with incomes below 100% of FPL will pay no premiums and specifies the benefits and cost sharing for their insurance plans (Act, Mass. Gen. Laws ch. 118G § 6 (2006)). For persons with incomes between 100% and 300% of FPL, the law requires the Connector Board to establish benefits, premium levels and cost sharing (Act, Mass. Gen. Laws ch. 176Q § 3(a)(14) (2006)). The Connector Board initially established a sliding scale of enrollee premium contributions between $0 and $118 per month depending on the enrollee's income, but later revised the schedule so that all enrollees will make lower contributions, with the maximum now set at $105 per month (Eligibility and Hearing Process for Commonwealth Care, Mass. Regs. Code tit. 956 § 3.11(H)(2) (2006); Connector, 2007c). The state pays the remainder of the premium for these plans, which have a total monthly cost of approximately $300 per enrollee. The enrollee share of the premium amounts to at most 4.2% of enrollees' incomes. Co-payments add to the cost, but are capped at $250 or $750 per year, depending on plan type (Connector, 2006a).

In setting the initial schedule of enrollee contributions for Commonwealth Care, the Connector Board considered the percent of income that typical consumers pay for health insurance; how much money eligible persons have left after paying for other necessities; and the enrollee contribution levels set by other states' subsidized insurance programs (Murphy, 2006). However, after the Connector Board set the initial enrollee contributions, some consumer advocates said the enrollee contribution levels were too high (Dembner, 2007a). The Greater Boston Interfaith Organization (GBIO) surveyed 367 of its members to determine how much money they had left over for health insurance after paying for necessary expenses such as rent and food. GBIO found that nearly half of those with incomes below 300% of FPL could not afford the initial Commonwealth Care premiums. It is unclear whether the GBIO survey accurately represents all low income residents of the state (Dembner, 2007a). Yet GBIO's efforts contributed to the Connector Board's decision to lower enrollee contributions (Eligibility and Hearing Process for Commonwealth Care, Mass. Regs. Code tit. 956 § 3.11(H)(2) (2006); Connector, 2007c).

Enrollment in Non-Subsidized Insurance Plans

To date, Commonwealth Care has enrolled about 115,000 persons, while the MassHealth expansions have extended coverage to an additional 47,000 persons and 7,000 persons have enrolled in Commonwealth Choice plans (Day, 2007a; Day, 2007b; MassHealth, 2007). In one year, Massachusetts has already provided insurance to over 169,000 of the 372,000 previously uninsured residents of the state (Day, 2007a; Day, 2007b; MassHealth, 2007; Raymond, 2007). Massachusetts' progress at expanding insurance coverage has been more rapid than expected. Such a rapid increase inevitably produced some delays and difficulties for individuals trying to enroll, and the state is working to resolve those problems (Dembner, 2007d).

To facilitate the enrollment process, the Connector Authority has engaged in informational outreach activities in collaboration with community groups funded by the state (Connector, 2007b). Because most of the uninsured in Massachusetts are men aged 19-39, the Connector partnered with the Boston Red Sox baseball team to use the immense regional popularity of the team among this demographic group to spread information about Commonwealth Choice (Rowland, 2007). The Connector even set up an information booth at Fenway Park (Connector, 2007e). It is too soon to assess the impacts of these efforts. At this time, many residents of Massachusetts are aware of, and supportive of, the new law, but few know its details (KFF, 2007). In particular, there is concern about cost, uncertainty about deadlines and confusion about the distinction between subsidized Commonwealth Care and unsubsidized Commonwealth Choice. This confusion has led some eligible persons not to enroll in Commonwealth Care because they think it will be too expensive (KFF, 2007; Joffe-Halpern, 2007).

Individual Mandate

Some groups are concerned that the individual mandate is simply a tax on healthy persons, first because healthy people must pay for insurance, but get nothing in return as long as they remain healthy, and second because premiums from healthy persons are used to fund care for unhealthy persons. Others respond that there is no guarantee that those who are healthy now will remain healthy, and insurance will protect against the risk of high medical bills should they experience future health problems. They also assert the right to require healthy persons to obtain insurance, because their tax dollars are used to subsidize the medical care of uninsured patients who cannot pay for care out-of-pocket.

Affordability Schedule

Chapter 58 specifies that those who cannot afford health insurance will not be penalized for failure to purchase it (Act, Mass. Gen. Laws ch. 111M § 2(a) (2006)). Some advocacy groups argued that the Connector Board should exempt all persons with incomes below 500% of FPL from the individual mandate (Dembner, 2007a). This would be problematic for several reasons. First, exempting all persons with incomes under 500% of FPL would do nothing to help persons between 300% and 500% of FPL obtain insurance (persons with incomes below 300% FPL get assistance through Commonwealth Choice). Second, it would not be fair to exempt persons with incomes below 500% of FPL whose employers contribute enough that the insurance is clearly affordable, while requiring persons with incomes above 500% to buy insurance even if they do not get employer contributions. Affordability is too nuanced an issue for such a blunt rule. Third, based on the most recently available data, this would exempt nearly half the residents of the state, which would significantly undermine the individual mandate (U.S. Census Bureau, 2005; U.S. Department of Health and Human Services, 2005). Finally, a large exempt population would increase the problem of adverse selection. Among those exempted from the mandate, the very ill would be likely to enroll in insurance plans because they would anticipate high medical costs, while those who expected to remain healthy might see no reason to enroll. The high cost of caring for the very ill subsequently would drive up the cost of insurance for everyone.

Other advocacy groups wanted to expand subsidized insurance instead of exempting a large portion of the population. The Affordable Care Today Coalition (ACT!!) argued that subsidies should be offered to persons with incomes up to 400% of FPL (Affordable Care Today Coalition, n.d.). They agreed that some persons with incomes between 300% and 400% of FPL cannot afford insurance on the private market, but thought the solution was not to exempt these persons from the mandate but to have the government help them purchase insurance. This system would generate additional upfront costs for the state, but eventually might save the state money by encouraging more efficient use of the healthcare system and reducing the burden of paying for emergency care for low-income persons. Insured persons are more likely to seek care soon after the onset of a medical problem, making treatment of the problem easier and less costly.

The Connector Board found a middle ground with its affordability schedule. The Board lowered the enrollee contributions for Commonwealth Care to the current $0 to $105 scale, then required all persons with incomes below 300% FPL to obtain insurance if the cost is equal to or less than the cost of Commonwealth Care. For those with incomes between $30,630 (300% of FPL) and $50,000, the Connector Board proposed a sliding scale of maximum individual premium contributions ranging from $150 to $300 per month. The Connector proposed analogous schedules for couples and families. Persons with incomes above $50,000 a year were deemed able to afford all insurance policies. All persons, regardless of income, can apply for individual waivers from the mandate if they have special circumstances that prevent them from being able to afford insurance. The Connector Board expects this affordability schedule to require 99% of the state's population to enroll in health insurance plans (Connector, 2007c).

Minimum Creditable Coverage

The Connector Board's MCC criteria will apply to private insurance policies, while the legislation lists government insurance programs that will also satisfy the minimum quality requirements, even though the benefits from those government insurance programs do not always satisfy the standard set by MCC (Act, Mass. Gen. Laws ch. 111M § 1 (2006)). The Connector Board has proposed that to satisfy MCC, an insurance plan will need to have a deductible of no more than $2,000, a limit on out-of-pocket costs—including the deductible—of no more than $5,000, at least three pre-deductible physician visits, and a prescription drug benefit (Connector, 2007a). The least expensive private insurance plan that satisfies these criteria is expected to cost approximately $154 per month (Connector, 2007b). The proposed minimum quality standard for young adult plans is similar to that for MCC, but allows a per-incident/illness or per year cap of $50,000 (Young Adult Health Benefit Plans, Mass. Regs. Code tit. 211 § 63.05(2)ii (2007) (Draft)).

There was controversy over the benefits included in the MCC criteria. The debate centered on whether a prescription drug benefit should be included. Consumer advocacy groups pushed for the inclusion of a prescription drug benefit (Affordable Care Today Coalition, 2007). Meanwhile, the insurance industry and business groups complained that the prescription drug benefit requirement might force 200,000 persons who currently have insurance to buy entirely new insurance plans (Dembner, 2007b).

Leslie Kirwan, Chairwoman of the Connector Board, was especially concerned about not penalizing persons who already had insurance, even if they lacked prescription drug coverage (Dembner, 2007c). Other Connector Board members were concerned that any plan without prescription drug coverage would not provide adequate protection to enrollees (Dembner, 2007c). The Board also realized that many employers only renegotiate their insurance coverage once a year and did not want to penalize employees when the only plans available to them failed to satisfy MCC (Kingsdale, 2007b). The Connector Board eventually reached a compromise under which the MCC requirements will not take effect until January 1, 2009. Until then, any insurance plan will satisfy the individual mandate.

Cost Containment

The lack of cost controls may threaten the success of Massachusetts' reforms. Many individuals feel that they cannot afford the unsubsidized Commonwealth Choice premiums, but could afford the subsidized Commonwealth Care premiums (KFF, 2007). If voters are forced to purchase insurance that they feel is unaffordable, support for the law may decline. However if the state attempts to alleviate that problem by taking on more enrollees in Commonwealth Care, the additional cost to the state threatens the success of the reform. Without some cost control measures, the future of the reform is in jeopardy (Norton, 2007). Currently the state administration is considering methods of controlling healthcare costs and ensuring funding for the reforms (Norton, 2007).

Lessons for Other Health Insurance Reform Efforts

Leading A Nationwide Trend: State-Level Health Reform Proposals

In recent years, many states have instituted health insurance reforms. Massachusetts' reforms and the extensive publicity surrounding them have spurred policy makers in some states to consider copying some of Massachusetts' strategies. Meanwhile, policy makers in other states have chosen very different strategies. Table 2 summarizes state-level reform efforts. The advocates, politicians, and healthcare providers who propose and implement health insurance reforms in other states have a chance to learn from the challenges Massachusetts has faced, and how Massachusetts has responded to these challenges.

Massachusetts' Lessons for State Level Reform Proposals: The Example of California

On the state level, California's proposal is most similar to the Massachusetts reform. In January 2007, Governor Schwarzenegger proposed a plan very similar to the Massachusetts reform. His proposal calls for a mandate requiring all adults in the state to buy insurance for themselves and their children. It also includes a subsidized insurance program for persons with incomes up to 250% of FPL and an employer mandate that requires employers to spend 4% of payroll on health insurance. Governor Schwarzenegger's proposal places a tax on doctors and hospitals to pay for the subsidized program. Finally, it requires insurance companies to spend 85% of all premiums they collect on patient care (California Office of the Governor, 2007).

Among other lessons, California can learn from both Massachusetts' and Maryland's experiences with employer assessments. California is currently considering an employer assessment similar to Maryland's, but may want to convert to one more similar to Massachusetts' to avoid repeating Maryland's problems with ERISA preemption.

California has already adopted other lessons from Massachusetts. Most significantly, the California proposal addresses the high cost of health care, which should help avoid the Massachusetts cost controversies. Governor Schwarzenegger's proposal also requires residents to insure their children, which addresses the problem of uninsurance among children more directly than Massachusetts' reform.

California's reform efforts are currently threatened by disagreement between the legislature and the governor. The legislature passed a variation of the governor's proposal which requires a larger employer contribution. Governor Schwarzenegger has vowed to veto this bill and request an extraordinary session of the legislature to reconcile the differences (Rau, 2007). It remains to be seen whether California will be as successful at finding a compromise as Massachusetts was.

Massachusetts' Influence on National Reform Proposals

At the national level, the frontrunners in the Presidential race have all proposed ambitious reforms. Democratic Presidential candidates former Senator John Edwards, Senator Hillary Clinton and Senator Barak Obama have all proposed systems that include elements of the Massachusetts reforms. All three proposals include employer assessments and premium assistance for low income persons. Clinton and Edwards also propose individual mandates, while Obama and Clinton seek to ban pre-existing condition exclusions, and Obama and Edwards both support Connector-like purchasing pools (Clinton, 2007; Edwards, 2007; Obama, 2007). None of the Democratic candidates fully embraces the Massachusetts model, but each uses many of its elements.

Meanwhile, Republican candidate Mitt Romney's national proposal is very different than the plan he approved as Governor of Massachusetts. Both Romney and Rudy Giuliani have proposed reforms that would deregulate insurance markets, encourage competition among insurers, alter the tax treatment of insurance premiums and transform Medicaid into a program of block grants to the states. Both also seek to control costs through expanded use of health savings accounts, medical malpractice reform, improved health information technology and increased transparency regarding healthcare providers (Romney, 2007; Giuliani, 2007).

Broader Lessons for Policy Makers

A preliminary consideration for policy makers is whether they want to focus on state level reforms or national reforms. National reform efforts are bound to face very different challenges than state-level approaches. First, the greater diversity of interests in the U.S. Congress, relative to state legislatures, could make it significantly harder to pass a national reform law. Massachusetts showed that political opponents can compromise to reach a solution, but opponents in Massachusetts may share more priorities than opponents at the federal level. Second, the scope of the national uninsurance problem is so large that any national reform will be more difficult to implement than state-level reforms. Third, Regional differences in healthcare costs and treatment strategies would also make implementation more complicated (Newhouse & Reischauer, 2004). As Edwards and Obama suggest, reliance on regional organizations similar to Massachusetts' Connector Authority could help accommodate regional differences (Edwards, 2007; Obama, 2007). For all these reasons, enacting reforms may be easier at the state level than at the national level.

However, national level health reform would offer some important benefits. For instance, if reformers wish to implement an employer assessment, they may find more success with national reforms than with state level reforms. First, a national system would standardize employer requirements across states. Rather than having to modify their policies to comply with various state rules, employers could use a single system in all states, which would reduce their administrative costs and ameliorate their objections to reforms. Second, a federal health insurance reform law would not face the risk of ERISA preemption. This would allow for simpler legislation that would not have to tiptoe around the unclear edges of ERISA, as did Massachusetts' health reform legislation. It would also allow for more robust quality requirements of the sort that Massachusetts' policy makers were afraid would be preempted. ERISA prevents states from mandating any specific level of employer sponsored benefits, but federal law could implement such requirements.

Whether health reform advocates choose to promote reform at the state level or national level, many lessons from Massachusetts may be helpful to them. Massachusetts' experience of backlash from non-providing employers, may suggest that other policy makers should move away from employer based insurance systems. Such a move could make it easier to enact reforms as it would gain support from many employers, by easing pressure on employers to provide health insurance. This is the line of reasoning that led Wal-Mart to call for a national health insurance system (Mui & Russakoff, 2007).

Massachusetts' difficulties educating the public about the state's health insurance reforms suggest that future reformers should put careful thought into outreach and enrollment. They should make sure that the public is adequately informed of the available options. This in turn requires them to tailor outreach and education efforts to specific populations. Such tailoring could be more difficult at the national level, given the greater range of populations that policy makers would have to address. Outreach efforts must also pay close attention to detail in order to avoid causing confusion by, for example, giving overly similar names to different programs, as Massachusetts did when it named its programs Commonwealth Care and Commonwealth Choice.

Massachusetts also showed that the nature of the reform dictates the lobbying efforts that may oppose it. An individual mandate based system, like Massachusetts', that relies heavily on privately owned insurance companies does not generate strong opposition from the insurance lobby. The insurance companies welcome laws that require consumers to buy their products. However, if the government tries to cut into the insurance companies' market by insuring citizens directly, there is likely to be a strong backlash from the insurance lobby - as occurred with President Clinton's proposal in 1992 (Koch, 1998). Policy makers at the state and federal levels may have more success enacting reforms that are structured to simultaneously benefit powerful business interests and advance the reformers' policy goals.

Future reformers can also learn from how the structure of the Massachusetts law facilitated its passage. By leaving many key decisions for the Connector Board, the legislature was able to focus on the principles behind the law rather than its details. It is much easier for legislators to support principles than to agree to details. As the former chairman of the Connector Board said last December, “if the legislature had tried to make these decisions, they'd still be meeting” (Trimarco, 2006). Details provide targets for opponents to attack, potentially delaying or derailing the legislative process. Future reformers can increase the chances that their proposals will get through the legislature by leaving many of the details to be filled in later. As in Massachusetts, this strategy could make implementation of health insurance reforms more difficult, but it may be the only way to enact the legislation and give stakeholders something to implement. Furthermore, as Massachusetts' success in enacting and implementing health reform shows, involving a wide range of committed stakeholders can help navigate a reform through the maze of implementation.

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