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State could be sued, healthcare giant warns

Fears proposed rules will face federal action

By Kay Lazar
Globe Staff / September 6, 2008
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Partners HealthCare, the state's largest private employer, is warning that Massachusetts may face a federal lawsuit if it proceeds with plans to raise the amount some companies must contribute to their workers' health insurance.

The proposed new rules, designed to help close a $130 million gap in the state's pioneering healthcare law, are opposed by several trade groups because, they say, businesses are already contributing millions more under the new law and the regulations would hit smaller firms especially hard.

Partners was one of dozens of business and consumer groups that testified yesterday at a public hearing on the issue. The healthcare giant's testimony stood out because it has long been a prime supporter of Massachusetts' landmark law.

Partners' vice president for community health, Matt Fishman, said he was concerned that if the regulations were adopted, it would prompt a federal court ruling that would throw out a key portion of the state's healthcare law.

"That would say to the nation that Massachusetts' health reform law is perhaps not as successful as many thought, even though the coverage numbers are so strong," Fishman later said in an interview.

He also said Partners does not object to the changes because of its potential impact on the healthcare chain, which includes Massachusetts General Hospital and Brigham and Women's Hospital. Rather, Fishman said Partners is concerned that a successful lawsuit would undermine the substantial progress the state has made.

The current law requires most employers with more than 10 full-time employees to offer health coverage or to pay an annual "fair share" penalty of $295 per worker. It gives companies an option of paying at least 33 percent of full-time workers' premiums within the first 90 days of employment or making sure that at least 25 percent of their full-time workers are covered by an employer plan.

But the proposed new regulations would require employers to meet both requirements, or pay the penalty. The rules, if adopted, would take effect Oct. 1 and raise about $45 million this fiscal year, according to state documents.

Courts have thrown out state laws that directly impose requirements on companies' health benefit plans, and Fishman said the proposed regulations bring Massachusetts dangerously close to such a challenge. He said, however, that Partners did not intend to file a legal challenge to the law. He said he did not know whether another company planned such a suit.

Sarah Iselin, commissioner of the Division of Health Care Finance and Policy, said her agency is aware of the potential legal risk and carefully considered that before proposing the new regulations.

"We heard many concerns expressed, as well as support by many parties, all of which we will take under advisement as we move forward," she said.

Iselin also said her agency estimates that nearly 90 percent of companies with 11 or more full-time employees will comply with the proposed new rules. She also said her agency's survey last year of all Massachusetts companies showed that 72 percent of businesses were offering some sort of health coverage.

In July, legislators passed a law, requested by Governor Deval Patrick, that requires hospitals to contribute an additional $28 million to help finance the new healthcare law and that also raises another $33 million from an assessment on insurance companies' reserve accounts. Earlier, administrators raised additional money by boosting premium payments for consumers who receive partially subsidized insurance.

Consumer groups who testified yesterday said it's time for businesses to step up and pay their fair share.

"We cannot balance health reform on the backs of the most vulnerable," said the Rev. Hurmon Hamilton, president of the Greater Boston Interfaith Organization, a coalition of religious, community, and civic groups.

"We need to make sure that the less than 30 percent of employers who do not cover their workers do not freeload," he said.

Kay Lazar can be reached at klazar@globe.com.

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