The Massachusetts (health care) experiment

  @Money June 4, 2013: 9:28 AM ET
obamacare

While Christina Carico looks for a full-time teaching job, she has been able to buy a reasonably priced health insurance policy.

(Money Magazine)

The heated debate lost most of its steam. The Supreme Court has swatted back the big legal challenge. And November's presidential election has snuffed out opponents' hopes for an 11th-hour reversal.

Come Jan. 1, you -- like almost every other American -- will have to carry health insurance or pay a fine if you don't, as one of the final pieces of Obamacare falls into place. In return, you'll be guaranteed coverage, no matter your health.

For the 6 million residents of Massachusetts, though, not a whole lot will change. In 2006 then-governor Mitt Romney signed a health-reform law that contained a similar insurance mandate, plus tough rules for when employers must offer plans and the blueprint for a government-run online insurance marketplace, or exchange. What became known as Romneycare ultimately served as the model for the national plan.

Some six years into the Massachusetts experiment, the people who live in the state have had plenty of time to answer the kinds of questions you may be asking about Obamacare now: Will my premiums go up or down? Will my boss drop insurance? Will I face longer waits to see my doctor? Am I looking at a tax hike to pay for reform?

Related: Romneycare vs. Obamacare

As a small New England state with a high-tech economy, the most doctors per resident in the country, and above-average health care spending even before reform, Massachusetts is not a perfect bellwether for the nation. The laws are far from identical, and the state only recently began tackling the costs of care. But the experiences of the locals can still tell you plenty about what to expect come Jan. 1 and what you might want to do to prepare.

"I give a lot of talks to groups from outside the state," says Andrew Dreyfus, CEO of Blue Cross Blue Shield of Massachusetts, "and I often begin, 'Hi, my name is Andrew Dreyfus, and I am from the future.' "

So for a glimpse at the future of your health care, there's no better place to start than Massachusetts. Here are the six most significant results of this statewide experiment, along with a look at how reform may shake out where you live.

When you mandate insurance, pretty much everybody gets insurance

Even before the mandate took effect in 2007, only 8% of Massachusetts residents went without insurance -- half the national figure today. The mandate, along with subsidies that make policies more affordable, has brought the Massachusetts uninsured rate down to 3%, the lowest in the country.

Now that firms with 11 or more workers are on the hook for insurance, small-business employees are less likely to go without. More low-income workers are covered. And the hard-to-persuade healthy 18-to-34 crowd has been brought into the fold: Only 6% of these "young invincibles" lack insurance today, according to the state's Center for Health Information and Analysis (CHIA), down from 18% pre-reform.

Some joined a parent's policy -- under Romneycare, as with Obamacare, you have that right until age 26. Others accepted workplace coverage they might have otherwise skipped, sometimes to everyone's benefit.

Related: I'm signing up for Obamacare

In the Berkshires of western Massachusetts, the Barrington Stage Company, which employs 15 administrators, many of them less than a decade out of college, saw more workers sign up. "When I talk to them about insurance, their immediate response is, 'I don't really have a choice, do I?'" says Peggy Thieriot, director of finance for the nonprofit theater.

Those reluctant invincibles are paying off. With more people on the plan and a lower average age, the organization is paying slightly less for each worker this year.

Some of the state's newly insured have seen a payoff too. In 2007, Andrew Herlihy, then 24 and working without benefits as an afterschool program director in Malden, shelled out $150 a month for a catastrophic plan. He didn't appreciate having insurance -- until he tore his ACL during a basketball game the next year and needed surgery that would have set him back $45,000 without coverage. Now Herlihy is literally a poster boy for the insurance marketplace, singing its praises in a video on the state's site.

The coverage that residents must get isn't paltry. When the law was being debated, consumer groups, initially reluctant to force everyone to buy insurance, fought for meaty policies.

"If you're going to require we buy this, it has to be comprehensive enough so that people with means weren't having to buy extra coverage, and people without means were going without," says Amy Whitcomb Slemmer, executive director of Health Care for All.

As a result, health plans are robust. Most policies must include prescription coverage and maternity and mental-health benefits. Since the law passed, legislators have made another dozen items mandatory for individual and some group plans, including orthotics and kids' hearing aids.

What's in store for you: The country is expected to fall short of Massachusetts' milestone: By 2017, 10% of Americans will still lack health insurance, estimates the Congressional Budget Office, down from 16% today. With less generous subsidies under the national plan and some states refusing to expand Medicaid, more low-income Americans may go without than has been the case in Massachusetts, says Tufts School of Medicine professor Paul Hattis.

Will your coverage get better? Workers at large firms with generous benefits may see no change, says Boston-based Mercer benefits consultant Susan Connolly. People who buy on their own probably will (for a price, as you'll learn).

A recent study found that 51% of solo shoppers are in plans that fall short of what Obamacare requires, which includes maternity and mental-health coverage and caps on deductibles.

Employers haven't dumped plans

Any Massachusetts business that employs fewer than 11 full-time workers can get out of providing health insurance today; bigger firms can opt to pay a fine of $295 per employee instead, which would almost certainly cost less than providing insurance. (Come January, Obamacare cut-offs may trump state rules.) With Romneycare making it easier for workers to buy affordable policies on the open market, the fear was that employers might have few qualms about closing the company plan.

How your health care will change in 2013

The opposite happened. From 2005 to 2011, the percentage of companies with three or more workers that offer insurance rose from 70% to 76%, according to the Massachusetts Employer Survey.

"You have to give employers credit," says Slemmer. "They've hung in there and shared in the cost burden." Only 5% of private firms pay the fine, says CHIA. Overall, businesses didn't cut hours or lay off employees to skirt the mandate, a study by the Urban Institute found. Most workers in Massachusetts still get insurance on the job.

At big firms, it helped that reform didn't jack up insurance premiums: Total premiums for group family policies have risen by 6.8% a year since 2007, down from a 9% rate between 2000 and 2006.

"Employers had already made a decision to offer insurance to their workers, so we didn't get much pushback," says Richard Lord, president and CEO of Associated Industries of Massachusetts, a trade group that represented the state's employers when the law was being debated. Still with more employees signing up, overall benefits costs rose -- the Massachusetts Taxpayers Foundation estimates that businesses spent an extra $500 million in 2012 due to reform.

For small operations that can skip coverage, deciding whether to offer the benefit can be tricky. Michael Tow, a financial planner in Brookline, began offering a plan to his two employees in 2007 because he was worried they might jump ship. "At a small firm like mine it's important to keep your core team intact," he says. He pays $1,000 a month for his two employees.

Related: Guide to figuring out health insurance

Linda Baker, owner of a Fall River signmaking business, initially went the same route with her two employees. But costs finally outweighed any hiring edge. As monthly premiums climbed $50 to $100 per worker annually, she changed plans three times in four years. "I wanted to give my employees coverage and have them stay," she says, "but it was drowning my company."

During a brief window when Baker had no employees on the plan, she dropped it. New hires will be on their own.

What's in store for you: Don't count on this much buy-in. The industries that dominate in Massachusetts -- education, financial services, and technology -- need skilled workers who expect insurance, says Josh Archambault, director of health care policy at the Pioneer Institute.

Under Obamacare, your boss won't have to offer you insurance if the company employs fewer than 50; bigger firms can pay a penalty that starts at $2,000 a worker in lieu of giving you coverage. Will they? Early signs point to a wait-and-see approach: In a recent Mercer survey, only 6% of large firms said they were likely to have workers buy their own policies come 2014.

If you work for a company with a big low-wage or part-time workforce that's now uninsured -- think retail and hotels -- you're in for more uncertainty. A firm facing penalties that are below the plan costs or a workforce that's largely better off in cheaper, government-subsidized insurance might simply skip a plan, says Archambault.

MORE: Buying solo insurance may be cheaper

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