Penalties went into effect this year for Massachusetts residents who do not have health insurance.
The penalties, assessed in the form of monetary fines, range from zero to $912 for an entire year without coverage. Analysts have called the program over-regulated and unenforceable, but a state panel already has recommended the penalties be increased.
The penalties are applicable only to adults judged by the Commonwealth Health Insurance Connector Authority, the agency that oversees the program, to be able to afford private insurance coverage. Fines accrue every month an eligible individual is not insured and would be due as a part of the tax filing process for the year.
Hefty Fines Show Failure
“The hefty fines are an indication of the failure of the program to provide the affordable health insurance that was promised,” said Arnold Kling, an adjunct scholar at the Cato Institute in Washington, DC.
The penalty for lacking insurance in 2007 was the loss of the personal exemption, worth $219, on an individual’s state tax return. This year the penalties are to be assessed at half the total cost of the cheapest health insurance plans available through the Connector Authority.
The state makes subsidized insurance available to individuals earning up to $30,636 per year, and to families of four earning $61,956 or less. For a year without coverage, a penalty of up to $672 will be assessed on individuals up to 26 years old who have incomes too high to qualify for subsidized health insurance. For those 27 and older, an annual penalty of up to $912 will be applied.
For those eligible for subsidized insurance, the annual penalty assessment is scaled according to income range. No penalty will be assessed on persons earning up to $15,324, because Commonwealth Care is free for people at that income level. A penalty of $210 per year will be assessed on people earning between $15,325 and $20,424.
Those earning between $20,425 and $25,536 will face a penalty of up to $420, and those earning between $25,537 and $30,636 will be penalized up to $630.
“The Massachusetts universal coverage plan is overregulated and largely unworkable,” said Devon Herrick, Ph.D., a senior fellow at the National Center for Policy Analysis in Dallas.
“The least expensive plan would cost a 37-year-old male resident of Massachusetts $196 a month, and the fine for not having insurance could run half of that, or $98 per month,” Herrick explained. “The same 37-year-old living in Dallas could buy coverage [in the private-sector insurance market] for $98 per month.”
Herrick says if Massachusetts were to deregulate its insurance market, premiums would fall so far the state might not need to create penalties for not buying insurance.
Kling points out the state’s intervention could be done far more effectively, in any case.
“A better alternative to a mandate would be a voucher,” said Kling. With vouchers, insurance plans would be designed from the bottom up, by consumers using vouchers along with their own money to pay for the insurance they prefer, he explained.
“With mandates, insurance plans are designed by government officials,” Kling noted, “which in turn means that they are influenced by special interests, driving up costs and forcing consumers to pay for coverage they don’t want.”
Dr. Sanjit Bagchi ([email protected]) writes from India.