Beginning next year, the ghost of Massachusetts health reform will be back to haunt employers in the form of a new tax. The tax will apply to some Massachusetts employers as a way to help fund the commonwealth’s combined Medicaid and Children’s Health Insurance (CHIP) program, known as MassHealth. The Massachusetts Department of Unemployment Assistance recently issued proposed regulations to implement the new requirements. The new tax assessments will be included in quarterly unemployment tax filings and do not require employers make a new, distinct filing with the commonwealth.
Beginning with the first quarter of 2018, employer medical assistance contributions (EMAC) included in unemployment insurance payments will increase from a maximum of $51 per employee to $77 per employee. In addition, a new $750 supplemental employer assessment will apply for each non-disabled employee who declines employer-sponsored health insurance and instead enrolls in MassHealth or buys coverage on Massachusetts’ health insurance marketplace (known as the Health Connector) for a continuous period of at least 14 days.
Lockton comment: Employees would be considered disabled, and thus exempt from the supplemental surcharge, if they are receiving coverage through MassHealth on account of Social Security disability or comparable benefits under state law. The new taxes would not apply to employers with fewer than six employees in Massachusetts since they are exempt from EMAC.
The commonwealth is soliciting comments on the proposed regulations and intends to have final rules in place prior by the start of 2018.
Lockton comment: Massachusetts enacted its version of health reform back in 2006. Although most of the original tenets of its health reform law were largely repealed to avoid overlap with the Affordable Care Act, Massachusetts employees still need health coverage that meets the commonwealth’s requirements so they avoid a penalty when they file their state income tax return. This is referred to as “creditable coverage,” not to be confused with creditable coverage for purposes of the Medicare Part D prescription drug benefit.
Although there is no requirement for an employer to provide creditable coverage to its Massachusetts-based employees, doing so will ensure the employees don’t suffer a state income tax penalty.