Obamacare will force state government to spend millions on health care for contract employees

February 27, 2013 at 7:35 am

By Meg Tully
meg@marylandreporter.com

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By Mike Licht, Notions Capital

State budget officials do not know how many state employees will qualify for medical coverage under the federal Affordable Care Act, or how much it will cost to comply with provisions beginning Jan. 1.

That number could be as high as $88 million for Maryland government, according to an analysis presented Tuesday by the Department of Legislative Services. The analysis showed the cost could dip to $20 million or lower if the state decides to pay a penalty instead of subsidizing coverage.

But in any case it is extremely unlikely the number would be as high as $88 million, said Anne Timmons, director of employee benefits for the Department of Budget & Management.

“That’s a worst-case scenario,” Timmons said.

State unsure of how many would be covered

The Department of Budget & Management plans to conduct an analysis in the next four to six months of the number of workers who will qualify and the cost of the state’s different options, she said.

As of Jan. 1, 2014, the act requires all employers with more than 50 employees to offer health care subsidies for all those who work at least 30 hours per week. If employers choose not to do so, they will have the option of paying an annual penalty instead, ranging from $2,000 to $3,000 per employee.

Because of the way the state government tracks part-time workers, it is unclear how many employees will qualify for the new benefits. The state tracks contractual employees by using a full-time equivalent standard – so two part-time employees working 20 hours a week would qualify as one full-time equivalent. The state of Maryland has just under 10,000 full-time equivalent contractual positions.

“This is helpful for total effort, but it doesn’t give you much detail about what the composition of the workforce is,” legislative budget analyst Patrick Frank told the Senate Budget & Taxation Committee Tuesday.

State offers health insurance, but doesn’t subsidize it

The state’s numbers don’t reveal how many employees work more than 30 hours per week, or how many are seasonal employees, he said.

But assuming there are about 10,000 employees who qualify, it would cost $88 million to provide a health care insurance subsidy of $9,000, the average state employee health insurance subsidy. If the state chose to pay the penalty fee instead, it would be as much as $20 million, the analysis stated.

Under the current system, contractual employees are allowed to enroll in the state’s plan, but the state does not provide any subsidy. The Affordable Care Act requires that the employee cost of health care coverage not exceed 9.5 percent of their earnings.

The state now needs to consider if it will subsidize contractual employees’ plans at the same rate as state employees, at a lower rate, or pay penalties instead, Timmons said.

Budget secretary balks at 50-position limit

Another issue that the Senate Budget & Taxation Committee will need to consider is how many positions the state is allowed to create after the fiscal year begins.

The Board of Public Works is allowed to create some new positions after the fiscal year starts, to allow for some flexibility. For the last three years, it has been allowed to create up to 100 new positions.

As part of Tuesday’s briefing on the Department of Budget and Management’s budget, legislative analyst Frank recommended that the state limit the number of positions to 50. From 2005 to 2009, the limit was 50, but was increased to 100 as the state battled fiscal challenges.

“We’re back to normal again, or at least close to normal,” he said, adding that there is now turnover and vacancies.

But budget secretary Eloise Foster said the 100-position cap should remain. The state created 77 new positions last year to provide lottery agency oversight of  new gambling activities and to implement Maryland’s health exchange program, she said.

“Having a cap of 100 really just gives the department the flexibility that we need to respond to unforeseen circumstances that come up throughout the year,” Foster said.

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  • hungrypirana

    First sentence: ” State budget officials do not know how many state employees will qualify for
    medical coverage under the federal Affordable Care Act, or how much it will cost to comply with provisions beginning Jan. 1.”

    Contractor employees, not state employees.

    ********************

    Sounds like ALL or MOST of the contracts’ payment and cost terms will be modified to address this matter, at least for contracts with employers having at least 50 employees. The state’s preferred contracting method is firm-fixed price, but there are significant cost-reimbursable agreements with greater or lesser degrees of risk being bourne by contractors. Increasing contracts’ ceilings is a contractor-friendly position to take.

  • abby_adams

    And we all wonder why the state budget keeps increasing year after year no matter how many “revenue enhancement” schemes O’Malley & the Dem majority in Annapolis dump on taxpayers. Does the phrase “out of control spending” ring a bell?

  • James Bush

    The current Governor has chosen to support the law. This Governor is going to feel the consequences of his support. He will not be elected President. If I was Governor I would closed the concession stands at all Parks that currently have them. I would close the pools at all state parks. I would abolish all part time employment and I would end all contract employment positions and turn most into permanent positions at full time hours. There that is what I would do as Governor saving millions of dollars per year.

  • Sandvk

    “The state now needs to consider if it will subsidize contractual
    employees’ plans at the same rate as state employees, at a lower rate, or pay
    penalties instead, Timmons said.”
    The state rightly balks at subsidizing contractual employees’ health insurance plans. It should go further and stop subsidizing all
    private health insurance plans. These subsidies merely prop up the private health insurance racket that adds nothing to health care except higher cost.
    Legislators and administrations at the state level (through the Maryland Health Security Act of 2012, HB1015/SB206) and federal level (through The Expanded & Improved Medicare For All Act, H.R. 676) have had many opportunities to provide universal, equal-access health care, while, at the same time, lowering health care costs. Instead, they scheme, as this article demonstrates, about how to avoid their responsibility to govern for the people. They serve their corporate masters well.