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The Department of Revenue has released its report on compliance with the health insurance individual mandate for tax year 2008.

The headlines are captured in the press release which announces that more than 96 percent of adult tax filers had coverage at some point during the year while 98.3 percent of filers complied with the health care reform tax filing requirement to fill out Schedule HC.

The number of taxpayers who had health coverage, as shown in the DOR report, is consistent with other recent studies and surveys which show the percentage of Massachusetts residents with health insurance coverage in the mid- to high-90s. DOR reports only on tax filers; not on the population as a whole.

The report also shows that Massachusetts residents are responding overwhelmingly to the requirement to report their health insurance coverage, or lack thereof, on Schedule HC. That cooperation from taxpayers is key to making the law work.

In tax year 2008, fewer taxpayers paid the penalty assessed those who are judged able to afford health insurance but who nonetheless do not obtain it; 45,000 paid the penalty while 60,000 paid it in tax year 2007.

The penalty for those who could afford insurance but who do not obtain it will increase to a maximum of $93 per month or $1,116 for an entire year of non-compliance in calendar year 2010. That is an increase from the maximum monthly penalty of $89 a month or $1,068 for the entire year in calendar year 2009, which in turn was an increase from the maximum penalty of $76 a month or $912 for the entire year in calendar year 2008.

These monthly and annual increases reflect the increased cost of healthcare. The penalty is based on one-half the cost of the most affordable, least costly insurance plan available from the Commonwealth Connector. As the cost of health care increases, so do premiums, even for the least costly health insurance plans.

Tax year 2008 was the first year in which the individual mandate for health insurance covered a full year. In tax year 2007, the year in which this new law was introduced, taxpayers had to show health insurance coverage for just the last day of 2007. The purpose was to ease the public and taxpayers into the law. So in a year or so DOR will release its report for tax year 2009, which will allow for the first time a comparison of coverage and compliance from one full tax year to another.

One final note:  State Tax Notes wrote a story in July which outlined the ways in which the experience of the Massachusetts Department of Revenue might prove useful to policy makers in Washington working on a  national health insurance reform bill. The article also pointed out that DOR had implemented its responsibilities without incurring additional costs. Download Tax Notes story

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