State budget includes new fees on businesses to help the state pay for health care costs

Massachusetts State House. Pat Greenhouse/Globe Staff

State lawmakers on Friday approved an annual budget that imposes new fees on businesses to help pay the state’s ever-rising health care costs, but they rejected a controversial series of proposals from the Baker administration to rein in those costs, drawing a rebuke from the business community.

Advocates for the poor applauded the Legislature’s decision to leave out policy changes that they said would have hurt families who rely on public health coverage. But employers said it was unfair of lawmakers to ask them to pay more without also taking steps to attack the underlying costs of the state Medicaid program, called MassHealth.

“We’re very disappointed,” said Christopher Carlozzi, state director of the National Federation of Independent Business, or NFIB. “This was sold to the business community as a temporary assessment that would directly go to relieving and reining in the cost of MassHealth. Without those reforms within this package, we feel the underlying cost is not going to be addressed.”

The annual budget includes a plan crafted by the Baker administration to raise $200 million a year in new revenue from fees on employers. An existing assessment that almost all businesses already pay, called the employer medical assistance contribution, or EMAC, will increase from $51 to $77 per employee. Employers whose workers currently receive public health benefits also will pay as much as $750 per worker.

The new employer fees are to be phased out after two years. To help offset the costs for employers, the Legislature agreed to lower the rate of increase in state unemployment insurance premiums.

But the budget omits a series of other changes requested by the Baker administration, including a proposal to move thousands of families and individuals off MassHealth and onto private health plans by changing eligibility rules. The administration also wanted lawmakers to approve a new kind of care provider called a dental therapist, strengthen pricing requirements on certain insurance plans, and make many other changes to rein in spending.

MassHealth covers about 1.9 million state residents and costs more than $16 billion a year. The costs are split between the state and federal governments.

It’s unclear whether the administration will accept the Legislature’s decision to ask employers to pay more for MassHealth without making other changes to the program. Governor Charlie Baker’s office did not directly respond Friday when asked how he would handle the issue.

“The administration will continue to pursue the reforms necessary to stabilize the health care safety net and protect taxpayers from picking up the tab for more workers’ health coverage,” Billy Pitman, a spokesman for Baker, said in a statement.

The governor has several options once he receives the budget, including signing the document or sending it back to legislators with changes for further debate.

“When the administration was seeking support for their package, they made it clear to the employer community that they would accept this as a package only,” said Eileen McAnneny, president of the Massachusetts Taxpayers Foundation.

Legislators said they didn’t have enough time to consider all of the administration’s health care proposals, which they received just a couple weeks ago. But State Representative Brian S. Dempsey, the House budget chairman, said the proposals deserve a closer look.

“I applaud them for their work,” Dempsey said reporters Friday. “It takes time. You’re dealing with a lot of stakeholders, a lot of interests. I think it’s positive that we have those proposals to go back to and look at.”

The Senate budget chief, Karen E. Spilka, said in an interview that she’d be open to reconsidering the proposals but that “there should be more time, and the process should be more transparent.”

NFIB, Mass. Taxpayers, Associated Industries of Massachusetts, the Massachusetts Business Roundtable, the Retailers Association of Massachusetts, and other business groups signed a letter Friday opposing the Legislature’s decision to leave big MassHealth changes out of its budget.

“Further delays to meaningful health care cost reforms are unacceptable and unwise. The Commonwealth must not lose sight of this urgent need for MassHealth and commercial health insurance reforms and we call for the rapid approval of the reform package in its entirety by the end of July,” the business groups said.

The administration was criticized by health care advocates and some Democrats last week for proposing policy changes that would cause many poor families to pay more out of pocket for their health coverage — and for raising the proposals so late. The lengthy plan was sent to a small committee of lawmakers as they were finalizing a budget behind closed doors in late June. The proposals have not been publicly debated.

Advocates had raised concerns about two policies in particular: One change would have allowed the administration to shift about 140,000 adults, including 100,000 parents, from MassHealth to commercial insurance plans on the state Health Connector, where they would have received less generous coverage at higher out-of-pocket costs.

Another proposal would have barred many low-income adults with access to employer-sponsored health insurance from obtaining MassHealth.

“We’re definitely relieved that those changes were not included in the conference budget,” said Victoria Pulos, a health care lawyer at the Massachusetts Law Reform Institute. “We look forward to working with the administration and coming up with alternatives that aren’t so harmful to MassHealth members.”

Brian Rosman, policy director at Health Care For All, said given that Republicans in Congress are working to repeal and replace the Affordable Care Act — which could destabilize health care programs in Massachusetts and other states — this is not the right time “to be messing with major changes to MassHealth and Connector programs.”

But Jon B. Hurst, president of the retailers association, said changes to MassHealth are necessary. “We do not want an assessment that is absent reforms of this system.”