Mandatory Health Care a Bitter Pill for Massachusetts Low-Wage Workers

By Jeremy Smerd

Feb. 24, 2010

Soon after Massachusetts state legislators passed a law in 2006 requiring full-time workers to buy health coverage from employers that offered it, Mirlene Desrosiers, a home health care worker, traded the state health insurance she could afford for an employer plan she could not.

Because her weekly gross income was a mere $500, she could have dropped insurance altogether and been exempt from paying a penalty. But with two small children and a physically demanding job that regularly entails lifting elderly patients, she felt that going without health coverage would have been irresponsible.

To pay her health insurance premium of $287 a week, she upped her hours, often working more than 120 hours a week at four different health care companies. She says she lives to work and works to pay for health insurance.

“Either way it’s a no-win situation. If you have insurance, you have to pay your life for it,” says Desrosiers, who is 41 and moved to the U.S. from Haiti 23 years ago. “If you don’t have it you still have to pay. So you might as well have it.”

Health care reform in Massachusetts was supposed to help those least likely to be able to afford health insurance. But that has not been the case for some low-wage workers, particularly home health care aides. While Desrosiers’ working life may seem extreme, owners of agencies say runaway health care costs mean that low-wage workers are purchasing insurance that is increasingly unaffordable.

“Most of our employee base does not want health insurance because they are living check to check, week to week,” says Mike Trigilio, president of Associated Home Care and Desrosiers’ employer. “They are barely able to muster enough money together for rent or food, let alone health insurance. In the past, a lot of employees would go without it. Now they are forced to take it, and it puts a strain on them and on our company.”

National health care reform efforts could have significantly improved the lives of low-wage workers like Desrosiers through generous federal subsidies that would help them pay for health coverage. But since the election of Massachusetts Republican Sen. Scott Brown in January to fill the seat vacated by the late Democratic Sen. Edward Kennedy, the passage of the Democrats’ health care plan appears unlikely.

If reforms do pass, they may include changes in insurance laws, including a requirement that all Americans purchase coverage without the subsidies to help them do so. If that happens, the federal government may do to low-wage workers across the country what Massachusetts did in 2006.

To this already complex situation, add an underlying and persistent threat to businesses and workers alike: growing health care costs. As the current impasse over federal health reform demonstrates, it’s easier for legislators—whether in D.C. or in Massachusetts–to extend coverage than to bring down costs.

“We were hoping there would be meaningful cost containment in federal legislation, but there doesn’t seem to be anything there,” says Rick Lord, president and chief executive of Associated Industries of Massachusetts, a business association. “That’s a huge challenge we face if we want to sustain this reform law.”

The lesson of Massachusetts

Lord knows the situation well. As a board member of the Commonwealth Connector, the organization created by Massachusetts to help residents purchase insurance, Lord has seen that expanding coverage in the state has been relatively simple. Massachusetts requires that individuals carry health insurance and makes most employers offer it. Today just 2.6 percent of the state’s residents are uninsured—the lowest percentage in the country.

But bringing down health care costs has been a much more complex and elusive goal.

“Reform’s been very costly to companies like us,” says Jonathan Morin, comptroller for Intercity Home Care in Salem, Massachusetts. “We’re getting no rate relief. We’ve incurred additional costs for our staff. In the end the workers pay for it.”

Much is made of the fact that an employer requirement in Massachusetts has increased the number of people who receive health insurance through work. Employers had predicted, as they do today, that any requirement to provide insurance harms an employer’s ability to tailor the scope and cost of health benefits to the needs of the business and its employees. They also predicted that employers faced with these costs would rather drop coverage.

But today, 96,000 more people in Massachusetts get their health insurance through their employer than before reform. The reason for this increase is that workers who are required to have insurance have few options. Most must take the health coverage they are offered, at the price offered.

If an employer with more than 50 full-time workers offers a health plan and pays for at least one-third of the premium, employees are no longer eligible for state-subsidized care, regardless of their income. They can forgo health insurance and pay a fine for flouting the law unless their premiums are deemed unaffordable. But if they want health insurance, they must take what is offered to them by their employer.

The insurance may not be affordable to workers, and though legislators could have required employers to pay more toward their workers’ insurance or pay heavier fines for not doing so, such a stance would have doomed the Massachusetts legislation to failure, Lord says.

“Clearly, putting higher spending contributions on employers would have been controversial,” he says.

The state has been hesitant to extend a helping hand beyond the assistance it already provides. This year, Massachusetts is providing subsidies to 180,000 residents who earn up to 300 percent of the federal poverty level, at a cost of $724 million, says Richard Powers, a spokesman for the state’s Commonwealth Connector. There are, however, 600,000 workers who get their health insurance from employers and who earn 300 percent of the poverty level. Had the state allowed into the program workers whose health care premiums were deemed too expensive, the cost would have been enormous, Lord says.

And while many workers presumably receive generously subsidized insurance from their employers, the cash-strapped state, facing a budget shortfall because of the recession, can barely afford to provide insurance assistance to those who are already eligible for it, Powers says.

Work less, get cheaper health care

Some workers nevertheless are trying to get state-subsidized care. To get around the requirement that they purchase their employer’s health insurance, some people have made themselves ineligible by working fewer hours. By becoming part-timers and earning less, they become eligible for state-subsidized health care.

Carol Regan, director of government affairs for PHI, a research and advocacy organization for home health care workers, calls this race to the bottom one of the “perverse employment outcomes” of the state’s health reform law. It creates what economists call “implicit marginal tax rates,” a situation in which subsidies create incentives for people to work less because working more would mean reduced benefits.

In a recent survey, PHI reported that 25 percent of home health care agencies said they reduced workers’ hours or made it harder to become a full-time employee to make the workers eligible for state-subsidized care.

“These disincentives to work are problematic in the home health care industry,” Regan says, adding that workers are in demand. “It’s a fast-growing industry. How do you get enough people to work there?”

While the recession has ensured a steady stream of job applicants, agencies nonetheless acknowledge that some health care aides work several part-time jobs so they don’t become full-time employees. Doing so allows them to become eligible for state-subsidized health care if they meet the income requirements.

“I think people will go where it’s least costly to them,” says Bob Dean, vice president of All Care Resources, a home health care agency in Wakefield, Massachusetts. “If they are working a full-time job, then they’re basically just working to pay for insurance.”

The lesson from Massachusetts is that national health care reform that requires all people to buy insurance coverage must not make it so onerous that working becomes a disincentive.

“If the cost of health care and the cost of living continue to go up, a lot of people are going to just stop working and go on welfare and get the health insurance that the government offers, if that would be in our benefit,” Desrosiers says, speaking a day after Scott Brown was sworn into office as the 41st Republican senator. “I just hope it doesn’t get to that point. I’d rather make my own money than wait for the government to give it to me, you know what I’m saying? I hope all parties get involved and come up with a solution that is best for everybody.”

Higher costs for older workers

Of course, Desrosiers is determined to work. For now, she prefers to pay higher health care costs by working harder and earning more. So too does Sandra Broughey, another home health care aide. Broughey, 58, could have gone without insurance rather than increase her hours in order to pay the $57 a week required for her insurance premium. And for many years, Broughey did go uninsured.

But a series of health problems—a tumor in her eye, a lump on her chest—changed her thinking. She was glad that reform forced her to get coverage, first through the state, then through her employer.

“I tell my company all the time that I’m so glad I had what I had,” she says.

Trigilio, president of the company that employs both Desrosiers and Broughey, says that three years ago, when the reform law went into effect, he spent 2 percent of his payroll on health care. Today he spends 8 percent. And next year he expects to pay 10 percent of his payroll on health care costs. Most home health care agencies have workers like Broughey—older women who are at risk for on-the-job injuries. The rate increases that the agencies have experienced have put health care further out of reach for their average workers.

“When we go out to get health insurance, we get [killed] on our rates because we have women, they’re mainly middle aged and they work in the health care industry—that alone adds 25 percent to the cost,” says Morin, comptroller of Intercity Home Care in Salem.

Stretched thin

Desrosiers works full time for one agency and part time for three other health care employers and makes $12 to $15 an hour. On a recent Friday afternoon, she was just finishing up a double shift that had begun at 11 p.m. the previous evening at an elderly client’s house. She was hoping to arrive home before her two youngest daughters returned from school.

“When I get home I will cook for my girls, then we’ll do some homework,” she says. After that, she’ll have a quick nap and be out the door before 6 for another overnight shift, which is often quiet enough to grab a snooze.

Since Desrosiers can work only when she is needed and gets paid only when she works, she works whenever she can. Her days off are few and far between. Her dreams of becoming a nurse are on hold.

“When I feel my body getting very tired, I just take the time off without pay,” she says. “Because my job does not have paid sick days, if you take the time off you don’t get paid.”

Democratic health care reform proposals, including the Obama administration’s, provide generous subsidies to workers whose premiums eat up a large chunk of their income. But employers have criticized those proposals for including penalties against businesses while not doing enough to bring down the cost of health insurance.

Trigilio is all for providing health insurance, “but companies like ours can only offer so much,” he says.

Americans wonder whether they will be able to afford health insurance if it is required by law. The same question worries employers as they consider their own financial viability. In Massachusetts, policymakers decided to put most of the burden on workers rather than employers. Federal reform could provide subsidies to low-income workers, but unless it also can bring down health care costs, reform will amount to cost-shifting to businesses and the federal government.

For low-wage workers, especially for home health care aides like Desrosiers and the businesses that hire them, national health reform represents a major test of the employer-based health care system. Desrosiers says she would measure the success of national reform by the size of her savings account. By that measure, reform in Massachusetts has fallen short.

“I thought it was going to help me,” Desrosiers says. “I thought it was a great opportunity for families like mine to have health insurance. We could pay less money for health insurance and have more money for savings. I have a checking and savings account and the savings has nothing. You can’t really save, my friend. You can’t really save.”

Workforce Management, March 2010, p. 17-20Subscribe Now!

Jeremy Smerd writes for Crain’s New York Business, a sister publication of Workforce Management.

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