NEWS_ARTICLE.RttP{Penalty could exceed $900 for refusing to get health insurance under mandatory Mass law}

Penalties for Massachusetts residents who can afford health insurance but do not purchase it in 2008 could quadruple compared with the maximum penalty in 2007, according to draft regulations released by the Department of Revenue yesterday.

The maximum penalty for those who flout the law and do not buy health insurance would be $912 a year, compared to $219 in 2007.

The higher penalty is intended to get those who are on the fence to buy health insurance. For those wavering, it could make more sense to pay for insurance than to pay the penalty.

The proposed penalties also drive home the full impact of the health reform law's personal mandate principle. This approach makes buying health insurance a responsibility of all residents, similar to the way drivers are required to purchase auto insurance. The penalty was enacted to spur residents to purchase insurance rather than rely on the care hospitals are still required to provide to patients regardless of coverage or ability to pay.

"We have worked hard to craft these penalties in a manner that is straightforward and easy to understand," said revenue commissioner Henry Dormitzer in a statement. "We hope they will encourage people who can afford health insurance to buy it."

In a statement explaining the penalties, the revenue department said, "These penalties apply only to adults who are deemed able to afford health insurance."

Residents who cannot afford insurance, based on state standards, won't be penalized. Residents who face penalties can appeal.

Residents can comment on the proposed penalties until Jan. 15. The regulations will be finalized early this year. Residents won't face the proposed penalties until early 2009, when they file their tax returns for 2008.

The health reform law, signed by former governor Mitt Romney in April 2006, states that the penalty for 2007 would be the loss of an individual's personal income tax exemption. This will cost residents who didn't get coverage $219 when they file their 2007 state income tax return.

Under the law, penalties for 2008 and beyond would be tied to the lowest-cost option of insurance coverage. But it was up to the revenue department to determine the precise formula.

Under the formula issued yesterday, the amount an uninsured resident pays for 2008 varies by income and how long the resident goes without insurance. For instance, those 26 and younger who earn too much to qualify for low-cost insurance and who go the whole year without coverage would pay a $672 penalty. Those 27 and older would pay $912, the maximum. Those who have coverage for part of the year would pay a corresponding amount of the penalty.

In addition, those who earn less than 150 percent of the federal poverty level, or $15,324 for an individual, won't face penalty.

The fees are based on half the cost of the least expensive insurance plan available to each resident but are capped to avoid excessive fees. Thus, a 60-year-old resident of Boston, who would pay more than $4,600 a year for health insurance provided by the state, could have been hit with a $2,300 penalty. But the maximum possible penalty is $912 for all residents. The draft regulations are available at the revenue department's website at mass.gov/dor.

It is still unknown how many residents will have to pay the $219 penalty for 2007, according to the Department of Revenue and the Massachusetts Health Insurance Connector Authority, which administers the new law. A spokesman for the Department of Revenue, said it would measure how many pay the penalty when 2007 tax returns are filed this spring.

The connector authority has said that about 290,000 residents have signed up for health insurance since the personal mandate went into effect July 1. That includes 160,000 residents who qualify for subsidized coverage, 70,000 who qualify for Medicaid, the government health plan for the poor, and 60,000 who purchased full-cost coverage through the state or their employers. The tally will be updated Jan. 10.

Before the health law was implemented, the state estimated that about 400,000 residents lacked health insurance while the US census estimated the number of uninsured was 657,000.

John E. McDonough, executive director of Health Care for All, an advocacy group that helped craft the health insurance law, said he was pleased with the proposed penalties.

The department "really listened, and we see a lot of our concerns reflected in this schedule," said McDonough. "It's fair, simple, and sensitive to the needs of residents."

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