Health & wellness

OCT. 1, 2009

Compliance uneven on health care law

Audits raise concern; business leaders call state’s rules confusing

Audits of select Massachusetts businesses suggest that a substantial number may not be providing workers the health coverage required by the state’s landmark 2006 insurance law.

Auditors targeted employers that provided incomplete or inconsistent information to the state in earlier reports. Of the 426 companies audited so far, 172, or 40 percent, had violated the law’s requirement that most employers contribute a portion of their workers’ insurance premiums or pay a penalty. Those companies owed an additional $5 million, the state said.

Regulators cautioned that the audit findings are not representative of the business community as a whole. The lack of compliance among the audited companies contrasts with data businesses have reported, which the state previously said indicated that 97 percent of Massachusetts businesses were meeting the insurance law’s requirements.


Business leaders say the audit results do not paint an accurate picture of compliance or of companies’ good-faith attempts to play by the rules. The problem, they said, is that the rules are so confusing that many employers are having a hard time understanding what is required of them. And some say they have been assessed penalties unfairly; 38 companies have appealed the audit findings.

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“These are honest mistakes,” said Bill Fields, a consultant in Sandwich who has advised dozens of companies from Cape Cod to Pittsfield. “In at least 80 percent of the cases I’ve seen, the employers really did try to comply with the law.”

As Congress debates a national overhaul that mirrors many of the key points of the Massachusetts law, the audit results and the complaints from employers show that writing and passing sweeping insurance legislation is only a first step. How it is interpreted by regulators and how it is enforced will have much to do with its success.

“The intent of health care reform is to ensure that people have access to quality health care,” said Senator Michael O. Moore, a Milbury Democrat who cochairs the Legislature’s Community Development and Small Business Committee. “The intent is not to fine companies. If we have an issue where certain businesses have problems complying, whether through confusion or whether it’s the way the regulation is written, the state should sit down with them and make sure they are in compliance.”

Many of the audited firms were restaurants, temporary help firms, and providers of home health care or janitorial services.


Among those found to be noncompliant is Nancy Carlson, owner of a Westborough staffing company who is trying to sort out why she was assessed $75,000, including the amount the state said she had underpaid since 2006, and a fine.

“Its been an all-consuming process,” she said, “trying to run a business and deal with this.”

Carlson believes she has complied with the law and appealed in July, seeking a hearing. She said she has heard nothing from the state. Meanwhile, penalties are mounting.

State law requires most employers to contribute at least 33 percent toward their full-time workers’ health insurance coverage and to have at least 25 percent of their full-time employees on the plan or face fines. Smaller employers have to meet only one of those two requirements, and businesses with fewer than the equivalent of 11 full-time workers are exempt from the law.

The state had projected that it would collect $30 million in penalties from businesses in the current fiscal year, but data released to the Globe by the Division of Unemployment Assistance, the state agency in charge of the audits and fine collections, indicates that revenue is coming in at an annualized rate of about $20 million. It is unclear whether this shortfall is related to the lack of compliance identified by the audits. Sarah Iselin - commissioner of the state Division of Health Care Finance and Policy, the agency that made the revenue projection - said it is too soon to say whether collections will meet her agency’s estimate.


The penalty payments are deposited into the state’s Commonwealth Care Trust Fund, which helps fund subsidized health insurance for low-income residents and health care for the remaining uninsured.

The state data show that roughly 33,000 companies are required to offer health insurance to their workers or face fines. But with just four auditors, the Division of Unemployment Assistance is stretched thin. Auditors did not start knocking on doors until last December, two years after the law went into effect, and they are, director Edward Malmborg said, still on a learning curve.

“We are always working to improve the process, because it’s such a new process,” Malmborg said. “We are trying to be as fair and precise as possible.”

But members of the business community said auditors are often misinterpreting the law by using incorrect information to calculate the size of a company’s full-time workforce, and that can magnify the fines.

“There are a number of companies that endeavored, in good faith, to follow the rules and went to their lawyers and consultants to make sure their programs complied, and when the [state] went in to audit, they found them not in compliance,” said Alden Bianchi, a Boston lawyer who served as an outside counsel when state officials wrote the 2006 law and now helps businesses navigate the audit process.

”The staffing industry is struggling with this, and so are restaurants and retailers, where they have a lot of part-timers,” Bianchi said.

State regulators have proposed some rule modifications, scheduled to go into effect today, that Bianchi said should ease most of that confusion.

Some business owners also say they are facing fines because they have been unable to get 25 percent of their full-time workers to sign up for their company’s health insurance, as is required of companies that employ more than the equivalent of 50 full-time workers.

Those who employ a lot of retirees, who are already covered by Medicare, and young adults, who are still covered under their parents’ plans, say they are being penalized even though their workers are insured.

But consumer advocates say that the regulation is meant to encourage businesses to make a fair and reasonable effort at providing their workers decent health insurance and that to make exceptions for those that cannot entice 25 percent of their workers to sign up violates the spirit of the law.

Iselin, the health care finance and policy commissioner, said her agency is working with the unemployment assistance office to help ease the widespread confusion.

“Together we work through and troubleshoot questions to make us as clear and transparent as we can,” Iselin said.

Kay Lazar can be reached at