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Massachusetts proposal exempts some from health insurance mandate

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BOSTON—Newly proposed rules would exempt nearly 20% of uninsured Massachusetts adults from a 2006 law that requires everyone to have health insurance and would increase state health insurance premium subsidies for very low-income, uninsured individuals.

Observers say the proposals are a well-thought-out compromise. Although the state may come a fraction less close to achieving near universal coverage, it also could defuse opposition to the law from those who could not afford to purchase coverage and do not qualify for state health insurance premium subsidies. At the same time, the highest state premium subsidies would be directed to those most in need.

"Unquestionably, it is massive political and financial compromise," said Randy Abbott, a senior consultant at Watson Wyatt Worldwide in Wellesley Hills, Mass.

"It is a way of getting as many people as possible into the health insurance system without placing an undue burden on those who truly cannot afford coverage," said J.D. Piro, a consultant with Hewitt Associates Inc. in Norwalk, Conn.

The new rules proposed by state regulators come one year after then-Gov. Mitt Romney signed the landmark legislation intended to move Massachusetts close to universal health care coverage.

To help accomplish that, the 2006 law requires all Massachusetts residents to have health insurance coverage later this year or face penalties. Massachusetts is the only state with such requirements.

In the first year, the penalty is relatively small, about $200. But in succeeding years, state residents are fined for each month they lack coverage. The fine is equal to 50% of the premium of the least costly health insurance plan that meets state coverage requirements.

The law, though, allows an exemption from the penalties for state residents who lack access to "affordable" coverage, leaving it to state regulators to define what is affordable.

Last week, the board of the Commonwealth Health Insurance Connector Authority--the agency implementing the law--proposed an income-linked health insurance premium affordability schedule.

For example, employees earning between $35,000 and $40,000 a year who declined individual coverage offered by their employers would not be penalized if their share of the monthly premium exceeded $200, while employees earning between $40,001 and $50,000 a year declining individual employer-provided coverage would be exempt from penalties if their monthly premium cost was more than $300.

Regardless of how much health insurance premiums cost, the penalties would apply to individuals earning more than $50,000 a year, couples earning more than $80,000 or families with children who lack health insurance coverage and earning more than $110,000. Even those individuals, however, could seek a one-year waiver from the health insurance coverage mandate for a reason such as temporary financial hardship.

In all, about 60,000 of the state's roughly 328,000 uninsured adults would be exempt from the mandate because even the lowest-cost health insurance plan was judged unaffordable for them.

At the same time, health insurance premium subsides would be increased for low-income uninsured individuals eligible for health care plans offered through a state program known as Commonwealth Care. For example, under the proposed rules, the state would pay the entire health insurance premium for an individual earning up to $15,315 annually. Under current rules, the full subsidy is offered to individuals earning up to $10,210 a year.

State officials describe the proposed rules as a balancing act. The rules "would aggressively expand health insurance coverage while protecting people against financial hardship," Massachusetts Secretary of Administration Leslie Kerwin said in a statement.

Others describe the rules in a more direct way. "It is horse-trading. You want to come up with universal coverage, but you recognize there are some people who can't afford to pay (for) coverage. This seems to be a reasonable compromise," said Rich Stover, a principal with Buck Consultants L.L.C. in Secaucus, N.J.

State officials say even by exempting a section of the uninsured population from the individual mandate, the state still may achieve 99% coverage in health insurance plans by the time the law is fully implemented.

"While 99% is not universal coverage, it truly is laudable," Mr. Abbott said.