Sacramento, CA — The vast majority of people required to buy unsubsidized private health insurance under Massachusetts’ mandatory purchase law have failed to do so, according to an updated analysis by the Foundation for Taxpayer and Consumer Rights (FTCR).
A California proposal modeled on the Massachusetts law, by Assembly Speaker Núñez, fails to correct for the affordability crisis faced by Massachusetts residents. In fact, a provision of Núñez’s proposal encourages insurance companies to raise rates. Under that proposal, insurers will be allowed to keep 15% of premium revenue for overhead and profit.
"Insurers, who will keep 15% of premiums no matter what they pay doctors and hospitals, will be all too happy to pay more — and charge policy holders more — in order to keep more," said Jerry Flanagan of FTCR. "Both the Massachusetts and California laws will inevitably lead to unaffordable costs for individuals and taxpayers."
Under the new Massachusetts law, by December 31, 2007, residents must be able prove they have purchased private health insurance or face financial penalties. Coverage in Massachusetts is already much more expensive than promised and insurers, whose premiums are not capped or regulated, have indicated rates will increase again next year. Massachusetts Senate President Murray has proposed mandatory hearings into rate increases over 7%.
Massachusetts’ law would require citizens to spend up to 10% or more of their incomes on health insurance. Co-pays and deductibles are not included in the 10%. Even at that stiff upper limit, the state estimates that 18% of the uninsured cannot afford insurance at all, including everyone making just over the subsidy cutoff of 300% of the federal poverty level. The same percentage of the uninsured in California would include over one million people.
"In just six weeks, Massachusetts consumers must have health insurance or pay a penalty under the law. They will end up paying more for less health care — an inevitable outcome when individuals are forced to purchase private health insurance and costs are not regulated," said Carmen Balber of FTCR, author of the report on Massachusetts’ law. "Families with children, older consumers and middle class families are some of the most likely to be lacking health care. They’re also the first to fall through the cracks under Massachusetts’ mandatory private insurance plan because insurers won’t provide an affordable product unless the state controls costs."
Few middle-income Massachusetts consumers have enrolled in the new mandatory coverage. Only 6% of new enrollees are buying private plans with no subsidy. Most of the remaining 94% of new enrollees are under 150% of the federal poverty level and receiving full subsidies.
"While it is beneficial to provide health care to the working poor, the Massachusetts plan is far from solving the unaffordability of private insurance for middle-income workers," said Balber. "Both California and Massachusetts plans, with small employer contributions, also may encourage employers to steeply reduce or eliminate work-based coverage."
1. Massachusetts faces a simpler problem than California does: The state has 500,000 to 650,000 uninsured versus six to seven million in California. Unlike California, Massachusetts health insurers are primarily non-profit and the state had guaranteed issue and community rating before the mandate. Massachusetts’ median annual income is also $15,000 higher than California’s. Even so, the law is not reaching the middle class.
Newly enrolled in Mass. sponsored health insurance: 135,306 (approx. 25% of MA uninsured)
94% of enrollees are taxpayer subsidized:
Full Subsidy: 101,000= 75%
Some Subsidy: 26,000 = 19%
Unsubsidized: 8,306 = 6%
2. The cheapest "affordable" plans aren’t affordable: Massachusetts assumes that insurance is "affordable" if consumers can pay the premiums, disregarding deductibles, co-pays and other co-insurance. The cheapest plans offered come with $2000 deductibles, co-pays of up to 35% for most health services, separate medication deductibles with up to 50% co-pays, and cap only some out-of-pocket costs.
Families could be required to spend 10% or more of their incomes on the health insurance premium alone. The cheapest "affordable" plans would require each of the following to purchase insurance:
– A 55-year-old in Boston. Cost: $4510 premium/yr, 9% of a $50,000 income;
– A small-town couple in their late-40s. Cost: $9,121 premium/yr, 11.4% of an $80,000 income;
– Parents in their mid-fifties with two kids in rural Greenfield. Cost: $13,752 premium/yr, 12% of $110,000 income.
3. Many cannot afford coverage even under this high affordability standard: Massachusetts estimates that 18% of the uninsured will be unable to afford to pay even the premiums of any insurance plan. This includes:
– Everyone, of any age, making just above 300% of the federal poverty level (the cutoff point for state subsidies);
– Singles over 55 making less than $50,000 a year;
– Couples over 50 making less than $80,000 a year;
– Families, with parents over 30, making less than $90,000 a year
"The Massachusetts experiment shows that mandatory purchase of health insurance just doesn’t add up, for families or taxpayers. If inefficient, high-overhead private insurers are allowed to charge whatever they choose, consumers pay more in the form of higher premiums and less coverage," said Balber.
The report released today provides an overview of the cost and status of the Massachusetts’ mandatory purchase requirement. Download the report here.
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FTCR is California’s leading public interest watchdog. For more information, visit us on the web at: www.ConsumerWatchdog.org.