Governor Charlie Baker, seeking to rein in the continued rise in medical spending, is proposing to penalize employers $2,000 per worker if they do not provide health insurance, and to also place new limits on hospital prices.
Baker administration officials said Tuesday that they want to bring back a provision of Massachusetts’ landmark 2006 health care law that was later axed: requiring employers with more than 10 full-time workers to pay a penalty if they fail to offer “adequate” health insurance.
Business groups immediately blasted the Baker plan, calling it an expensive new tax.
The governor, a Republican and former health insurance executive, also wants to cap payments for some health care providers, eliminate certain hospital fees, and end new coverage requirements that drive up premiums.
The measures are expected to be detailed in the governor’s annual budget proposal next week and would require legislative approval. They are aimed at controlling the state’s ballooning health care spending, primarily for Medicaid. The federal-state program, known here as MassHealth, insures about 1.9 million low-income people and costs more than $15 billion a year — nearly 40 percent of the Massachusetts state budget.
The program’s enrollment has been growing in part because the federal Affordable Care Act allowed many low-income workers to join the public program even if they had access to insurance from their employers, the administration said.
“The unintended consequences of Massachusetts’ compliance with the Affordable Care Act are forcing taxpayers to cover the cost of a growing number of employed individuals’ health care as these workers increasingly move to the publicly subsidized health care system,” Baker spokesman Tim Buckley said in a statement.
Baker is grappling with rising Massachusetts medical costs as President-elect Donald Trump and the Republican-led Congress promise to quickly repeal and replace President Obama’s health care law. The repeal could cause millions of people to lose subsidized insurance coverage and threatens to undermine the flow of federal dollars that help fund health care in Massachusetts. Federal money helps cover the costs of MassHealth and subsidies for those who buy insurance on the Health Connector.
Baker has asked Congress to maintain key provisions of the current law and allow Massachusetts to keep its first-in-the-nation mandate that all residents obtain health insurance.
In the plan outlined by officials Tuesday, first reported by State House News Service, Baker proposes an annual per-employee penalty for businesses that would add an estimated $300 million to state revenue. The costs would apply to employers that pay less than 60 percent of their employees’ health insurance premiums and cover less than 80 percent of their workforce.
Employers, including the 4,000-member group Associated Industries of Massachusetts, cried foul.
“It’s likely going to fall on employers that have low-income workers, and those tend to be employers with not-large profit margins who will find this difficult to absorb,” said Richard Lord, president of AIM. “It seems to be an unfair assessment on employers who are trying to do the right thing.”
A similar employer assessment was part of the Massachusetts health care law approved under former governor Mitt Romney, but was repealed in 2013 under former governor Deval Patrick as employers braced for a new federal mandate under the Affordable Care Act. But that federal penalty has yet to be implemented.
Jon Hurst, president of the Retailers Association of Massachusetts, said Baker’s proposed fee would disproportionately hurt small businesses, which already have to comply with several mandates from which larger employers are exempt.
“We certainly oppose this,” he said. “How can they justify a tax when they have created a playing field that is discriminatory?”
Administration officials said they would push for “payment caps for certain health care providers,” but they did not explain how the caps would work or which providers they would apply to.
Hurst said capping hospital payments could help control costs but urged the administration to go further and actually cut current levels of payments. Some of the state’s hospitals have long been criticized for using their market power to charge more than their competitors for the same medical services.
Executives at the Massachusetts Health & Hospital Association said in a statement they are anxious to learn more about the administration’s proposals and “look forward to working with the administration and Legislature on a collaborative approach to change that incorporates the critical needs of all parties.”
The group’s president, Lynn Nicholas, previously told the Globe that hospitals are opposed to regulation of payment rates. Some hospital executives have said that they need higher payments, not lower, to keep up with the rising costs of providing care.
Health insurers, meanwhile, welcomed new efforts to tamp down hospital payments and overall health care costs.
“The governor clearly recognizes that more needs to be done relative to provider prices, and that the increase in growth in Medicaid is crowding out any other priorities the state would hope to accomplish,” said Lora Pellegrini, president of the Massachusetts Association of Health Plans. “The plans have been very aggressively regulated. . . . This is an effort to bring the providers into this conversation in a meaningful way.”
Lawmakers said that they were pleased that Baker is targeting health care costs, but added that they have yet to see the details of his plan.
House Speaker Robert A. DeLeo said he is still reviewing the proposals with other House leaders. “Health care cost-containment continues to be a focus of the House. . . . We’re also closely watching what is going on in Washington,” he said in a statement.
Senate leaders previously said health costs would be among their legislative priorities this year. “We’re pleased the governor and the administration are willing to join us in that effort,” said Senator James T. Welch, a Democrat who co-chairs the Joint Committee on Health Care Financing.
Welch is also co-chairing a special commission on hospital price variation, which is scheduled to issue a report with recommendations in March.
Joshua Miller of the Globe staff contributed to this report. Priyanka Dayal McCluskey can be reached at priyanka.mccluskey
@globe.com. Follow her on Twitter @priyanka_dayal.