Excerpted From: State Briefing Book on Health Care
September 23, 1994
W24
State Employer Mandates
Two types of mandates have received considerable attention. Under the first approach, employers are required to provide health insurance for their employees. Under the second, employers have a play-or-pay option and must either provide health insurance or pay a tax.
Hawaii, currently the only state that has a mandate in force, adopted the first type of employer mandate nearly 20 years ago. [See the Employer Mandates below] But though Hawaii has been praised by many, including the American Medical Association, for its attempt to create universal coverage, the percent of the population uninsured in Hawaii is no lower than that of Iowa or Wisconsin, and only 1 percentage point below seven other states.
Massachusetts was the first state to pass a play-or-pay mandate. Though enacted in 1988, it has never been implemented. Massachusetts intended to phase in the mandate in 1992, but the date was postponed to 1995 after legislators discovered that the state’s struggling economy could not support the burden. And given its history of delays, the mandate may never be implemented.
Employer Mandates
There are two types of employer mandates. One requires employers to provide their employees with health insurance by paying some portion of the premium (Hawaii and Washington). The other gives employers an option of providing health insurance or paying a tax (Massachusetts and Oregon). Hawaii is the only state with a mandate currently in force.
Hawaii.
Since 1974, the state has required employers to provide health insurance for all employees working over 20 hours a week. (Hawaii is the only state that can regulate the health insurance plans of self-insured companies under a special ERISA exemption granted by Congress.) Those not covered by the law " employees working fewer than 20 hours a week, government employees, small family businesses, the unemployed and seasonal workers " or by Medicaid are supposed to be covered by a program established in 1989 known as the State Health Insurance Plan (SHIP). However, the reality is very different. The percent of the population uninsured in Hawaii is no lower than that of Iowa or Wisconsin, and only 1 percentage point below seven other states.
Massachusetts.
In the 1988 presidential campaign, Michael Dukakis claimed that he had provided health insurance for everyone in Massachusetts. But before the mandate for employers was to take effect in 1992, the state legislature postponed it until 1995. The program has not been implemented and may never be. Governor William Weld argues that it would devastate the state’s economy.
This early attempt at play-or-pay legislation requires Massachusetts employers to provide health insurance for their employees or pay a tax of 12 percent on the first $14,000 of wages, or $1,680. Although the bill was intended to make health care “universal” and affordable within the state, more people might become uninsured if the program were implemented. Health insurance costs for an employee with dependents would likely be much more than the tax, and many employers would find it cheaper to pay than to play.
Washington.
In 1993 the state of Washington adopted a health care reform program which some called a model for President Clinton’s managed competition plan. Large employers (over 500) would have had to cover their employees by July 1995 and the employees’ dependents by July 1996. All employees and their dependents would have been covered by July 1999. Employers would have been required to pay at least 50 percent of their employees’ premiums. However, the state repealed this plan in 1995.
Oregon.
Under Oregon’s new play-or-pay plan, employers must provide health insurance coverage to employees or pay an amount equal to 75 percent of an employee’s premiums and 50 percent of the dependents’ premiums into a state fund that will provide coverage for the uninsured. However, the state must first find funds for the program.
Sources: Pamela Loprest and Michael Gates, State-Level Data Book on Health Care Access and Financing (Washington, DC: The Urban Institute, 1993); and "Health Care Reform: State-by-State Analysis," American Legislative Exchange Council, Legislative Update, revised July 26, 1993.
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