Massachusetts recently enacted changes to health care coverage regulations for employers with six or more employees. To help you understand how these changes might affect you, your employees, and your business, Waldron Rand worked with attorney Matthew Slater to develop this informational memo.
Massachusetts has seen increased utilization of publicly subsidized health care coverage and a shift away from employer-sponsored insurance plans. Accordingly, this has increased costs to taxpayers. On August 1, 2017, Governor Charles Baker signed H.3822, increasing the Employer Medical Assistance Contribution (EMAC) and imposing an additional surcharge (the EMAC Supplement) on employers with six or more employees who have health care coverage for 56 days during a quarter either:
- Under MassHealth; or
- Through ConnectorCare subsidized coverage (certain plans offered through Massachusetts’ Marketplace)
The Massachusetts Department of Unemployment Assistance (DUA) issued proposed regulations regarding the EMAC on November 6, 2018. These regulations have now been promulgated at 430 CMR 21.00 et seq. Excepted from the regulations are employers who “employ not more than five employees.” 430 CMR 21.00 1(2). Additionally, employees who in a quarter-year “who in that quarter have health insurance coverage either on the basis of permanent and total disability as defined under Title XVI of the Social Security Act or under applicable state laws” do not count towards the criterion. Employees receiving MassHealth or subsidized coverage “as a secondary payer” likewise are excluded from the total.
For those employers meeting the criteria above, the new regulations will impose an EMAC Supplement of 5% of the employee’s annual wages, subject to an annual cap of $15,000 of salary, for a maximum liability of $750 per affected employee. As a practical matter, the low threshold will capture virtually every such employee. The EMAC Supplement is imposed irrespective of whether the employee works full-time or part-time, because it is based on wages, not hours worked. Employers will see required EMAC Supplement charges on statements showing their Unemployment Insurance (UI) liability. The EMAC Supplement is limited in duration—it is in effect from January 1, 2018 through the end of calendar year 2019. Employers can expect to see such charges on their first-quarter statements in April 2018. Upon the sunsetting of the EMAC Supplement, there is no automatic provision for renewal—additional authorizing legislation and regulations must be promulgated.
The new regulations contain an appeal process for “administrative appeals from determination of liability” 430 CMR 21.00 6(1). However, the appeal process is confined to the “determination” of liability, and therefore can be expected to be based only on factual errors. There does not appear to be a “safe harbor” provision whereby an employer may appeal the DUA determination because an employee has declined employer-provided health coverage. Such appeal must be taken within 10 days of the receipt of notice of the determination. Further appeal upon adverse finding by the appellate body may be taken in the Superior Court. Such appeal must be commenced within 30 days of the receipt of the decision.
Penalties for Noncompliance
The regulations allow the DUA director to collect overdue contributions, including interest charges and penalties as provided for under G.L. c. 149, s. 189A. Additionally, the regulations characterize nonpayment of contributions as nonpayment of “UI contributions.” Accordingly, “[a]n employer who does any of the following shall be subject to the penalties provided under M.G.L. c. 151A, § 47, including fines and imprisonment:
- Willfully attempts to evade or defeat any contribution, interest, or penalty payment
- Knowingly makes any false statement or misrepresentation to avoid or reduce any financial liabilities under M.G.L. c. 149, § 189A
- Knowingly fails or refuses to pay any such contribution, interest charge, or penalty under M.G.L. c. 149, § 189A
- Attempts to coerce any worker to misrepresent his or her circumstances so that the employer may evade payment of contributions” 430 CMR 21.09 3(b)
Questions Left Unaddressed by the Regulations
The regulations leave several unanswered questions and factual scenarios that will likely produce litigation, including:
- Whether an employer will be assessed the surcharge where the employee works two different jobs and earns $15,000 or more at each job
- Whether the regulations allow DUA to exact the penalty upon two separate employers of the same individual where the threshold criteria are met
- Whether an employer will be assessed the surcharge where the employee declines employer-sponsored coverage in favor of MassHealth or subsidized coverage (the regulations do not assess the penalty based on whether the employer makes the coverage available—the penalty is assessed based on whether the employee is actually insured through MassHealth or the Connector programs)However, where the employer offers affordable coverage that meets minimum value standards, the employee would not be eligible for Connector program coverage. Accordingly, while not specifically addressed in the new EMAC Supplement regulations, this scenario may not bear out factually speaking.
Waldron Rand thanks Matthew Slater, Partner at TKCK Law, for his invaluable assistance in interpreting and developing this information for our clients.
If you have any questions about how these new regulations affect you as an employer, please contact us for details on your specific circumstances.