And while states that have a higher percentage of uninsured residents may be less likely to adopt a similar initiative, the new legislation has focused all eyes in the health care debate on Massachusetts.
"This has stirred the policy pot," says Helen Darling, president of the National Business Group on Health.
Spurred by the risk of losing $385 million in annual federal Medicaid funding, legislators made a bipartisan effort to placate concerns from businesses concerning the high fees and price tags of health plans. Those are costs that have sunk previous measures aimed at mandating near-universal health insurance coverage for the state’s 550,000 uninsured residents.
Health care and business experts cited several reasons why the legislation had the support of business groups. The bill, which passed the state Legislature almost unanimously, is expected to be signed by Republican Gov. Mitt Romney and go into effect in January 2007.
"I would characterize this as a big evolutionary step forward," says Jim Klocke, executive vice president of the Greater Boston Chamber of Commerce, one of the groups involved in drafting the measure. "The legislation contains a number of very innovative measures that we think will make health care more affordable and accessible."
The most radical innovation is a requirement that individuals who can afford some form of health insurance must buy it.
The legislation will also allow companies to offer employees cheaper, pared-down health plans that might include, for example, catastrophic insurance, limited doctor’s visits and only generic drugs, or high-deductible health plans with low premiums. Employees will also be able to buy these limited health care plans through their employer using pretax dollars.
The legislation will also create market reforms that will allow individuals and small groups to buy insurance collectively, creating an economy of scale that could reduce individual premiums by 25 percent.
Employers that have 11 or more full-time employees but do not contribute to their employees’ health insurance premiums will be forced to pay $295 a year for every full-time employee, a fee that is far less than the $800 outlined in earlier drafts of the bill.
That fee, which would go toward the $160 million pool that helps pay for the emergency hospitalization of the uninsured, is aimed at correcting what the plan’s architects say is an imbalance in the state’s current system. Currently, employers that provide health insurance are required to pay an insurance tax, while businesses that do not offer health insurance do not pay into the fund.
Companies that do not offer employees a health care plan, either their own or through the health care market to be created by the state, risk having to pay for an uninsured employee's health care costs if these costs rise above $50,000.
Beyond the plan’s particulars, experts believe employers could also reap long-term benefits if employees experience fewer sick days and emergency room visits.
"A healthier workforce is probably a workforce that changes jobs less and probably a workforce that is more productive," says Jon Gabel, vice president for the Center for Studying Health System Change.
Gabel says the legislation, if it works, could be adopted by neighboring states that have a similar uninsured rate of around 10 percent.
"But for states like California, Arizona or Texas, which have around 20 percent uninsured, this is neither politically nor economically doable," he says.
It remains to be seen, however, whether the program will reduce overall health care costs in the state. While the policy might reduce the overall cost of coverage initially, others say the costs will rise because people who have health insurance spend more on health care than those who do not see a doctor except when they really need to.
"This legislation is a very, very short-term solution that won’t have a meaningful impact unless they take more steps to manage costs," says Brian Klepper, president of the nonpartisan Center for Practical Health Reform.
The legislation does include mechanisms to make the cost of insurance more transparent. But the cost of monthly premiums have not been fixed. While legislators believe it could be around $200 a month for individuals, that number could be significantly higher.
Others say the increase in cost is not as important as how the money will be spent. Observers believe costs will shift from hospitals to primary care physicians as individuals spend more on preventive care. The result could be a more economically stable health care system.
"They will spend more money covering people in total than the handful of people who enter the emergency room," says Darling at the National Business Group on Health. "We’re going to spend more money, but we’re spending it on the right things."