Governor Deval Patrick proposed legislation Tuesday that would freeze the rate employers pay to fund unemployment benefits for the fourth year in a row and reduce the amount they must pay toward health care benefits for the unemployed.
The rate freeze, which stops a scheduled increase from going into effect, would save employers about $500 million this year, administration officials said.
But the legislation would also require employers to contribute to a new fund to help pay for subsidized health care for low-income residents. The rate would be lower than what employers now pay to provide health benefits for unemployed workers.
“This strikes a balance that promotes both fairness and accountability and obviously relieves burdens on businesses, as it should,” said Glen Shor, secretary of administration and finance. “Anything we can do to help businesses focus on creating jobs, providing health care to their employees, and investing in the economy is a real positive.”
The last recession reduced the balance in the state trust fund that pays unemployment benefits., and under state law, rates go up automatically to replenish the fund. But the Legislature has approved the rate freeze in each of the past three years to help struggling businesses in a weak economy.
Administration officials say the trust fund has sufficient money to continue the freeze. Employers currently pay an average of about $745 per employee a year, but that would increase 25 percent to $929 per employee without the freeze.
“You can let the rates go up and require employers to take an additional $500 million and bank that or let that money move through the economy to be invested and use that for hiring,” said John Regan, senior vice president for government relations at Associated Industries of Massachusetts, the state’s largest employer group. “In this economy, you want to have that money running around in the economy.”
The governor has also proposed eliminating two programs as a result of the federal health care overhaul, known as Affordable Care Act, which goes into effect in 2014.
The federal measure is similar to the universal health care law enacted in Massachusetts in 2006.
Patrick proposed eliminating the state’s Fair Share Contribution program, which requires employers with more than 11 employees to pay a $295-per-worker penalty if they do not contribute to the health insurance of full-time employees.
The federal Affordable Care Act has a similar requirement for employers with more than 50 employees, and penalties of up to $3,000 annually per employee. State officials said the Massachusetts program duplicated the federal law and could result in double penalties.
The governor has also proposed eliminating the Medical Security Program, which subsidizes health care coverage for individuals receiving unemployment insurance benefits. According to the state’s website, Massachusetts is the only state in the nation to offer the benefit.
Shor said the people served by the program will be eligible for health care benefits through existing state insurance programs, such as MassHealth and the Health Connector, in 2014.
The program has been funded by employers who pay an assessment of $67 per employee, Shor said.
The governor has proposed eliminating the program but assessing an annual $50 “employer responsibility contribution” per employee.
Senate minority leader Bruce Tarr, Republican of Gloucester, issued a statement calling for the state to make long-term reforms to the unemployment system that would lower costs and make it more stable.
He called the administration proposal an “annual rate freeze exercise that leaves employers with the perennial uncertainty of whether or not they will face additional substantial increases.”