Massachusetts Penalties to Rise for Rejecting Health Care Coverage

Massachusetts residents who can afford to buy health insurance coverage but do not would pay penalties of as much as $900 in 2008, under proposed regulations.

Under the state’s landmark 2006 law, intended to move Massachusetts close to universal health care coverage within a few years, the penalty for not having coverage in 2007 was the loss of the personal exemption for state income tax purposes, which equaled $219.

In 2008 and succeeding years, the penalty is based on one-half of the premium of the lowest-cost plan available through a state agency known as the Connector Authority. The law, though, left it to the Massachusetts Department of Revenue to provide the details.

Under the regulations, the penalty for not having coverage would be linked to income and the period of time that a person is uninsured. For example, a 27-year-old with income exceeding 300 percent of the federal poverty level would pay a penalty of $76 for each month he or she was uninsured, up to $912 if uninsured for the entire year.

The penalties are intended to encourage state residents to purchase health insurance.

However, the penalties do not apply to those who can prove that affordable health insurance coverage is not available. And, under existing regulations, employees earning between $35,000 and $40,000 a year who decline individual coverage offered by their employers will not be penalized if their share of the monthly premium exceeds $200, while employees earning between $40,001 and $50,000 a year declining individual employer-provided coverage are exempt from the penalties if their monthly premium cost is more than $300.

Regardless of coverage costs, the penalties would apply to individuals earning more than $50,000 a year, couples earning more than $80,000 a year or families with children earning more than $110,000.

The penalties do not apply to individuals earning up to $15,324, since their health insurance premiums are completely subsidized by the state. Currently, about 75 percent of state residents who lacked coverage before the enactment of the 2006 law now are insured, with most of the newly insured obtaining coverage through a state premium subsidy program available to lower-income residents and through an expansion of Medicaid, which is offered to the very poor.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.