Francisco Machado of Lowell had long gone without health insurance. Strong and healthy, he preferred to save the money or send it to family in Brazil, until pain and buzzing in his ear sent him to the emergency room. The $600 bill persuaded him to enroll in a plan offered by his employer, a cleaning company.
Having coverage meant that the 45-year-old would no longer be hit with a state fine — he paid $406 in 2011 — for being uninsured. But this spring Machado moved to a part-time job and became uninsured again.
Massachusetts had the nation’s highest rate of health coverage even before passage of a pioneering 2006 law requiring most residents to have insurance. Yet tens of thousands of people like Machado go uncovered each year and pay a fine. Starting in 2014, when much of the national Affordable Care Act kicks in, millions of other Americans could face a similar fine, putting Massachusetts in the spotlight as a possible indicator of what lies ahead for the country.
The federal plan mimics the state’s law in its basic approach to expanding coverage: Make health insurance more affordable through new subsidies and a state-run insurance market. Then compel most people to buy plans and penalize those who do not.
Policy advocates say the Massachusetts law lays out a financial and moral incentive to get coverage. But it is not clear that this approach can be effectively replicated nationally.
“Massachusetts is culturally more open to that kind of a bargain,” said Alan Weil, executive director of the National Academy for State Health Policy.
Many more of the uninsured in other states could decide to pay the penalty than have in Massachusetts, where the vast majority of residents already had insurance before passage of the state law.
People may be less persuaded to purchase a plan in states where politicians and others deride the federal law and encourage people not to comply, Weil said. Republican leaders in Florida, South Carolina, and elsewhere, have indicated they will resist major provisions of the law, including an expansion of Medicaid that would make government-funded coverage available to an estimated 17 million low-income people nationwide.
The Congressional Budget Office estimated that about 4 million uninsured people could pay the federal penalty in 2016, but the projection was made before the Supreme Court decision last week that made the Medicaid expansion optional for states.
Much has been made about what to call the fine imposed by the national law. The Obama administration repeatedly has said it is not a tax. But the Supreme Court upheld the law on the basis that it is a tax.
A spokesman for presidential candidate Mitt Romney, who claims as a hallmark of his time as governor of Massachusetts that he did not raise taxes, said after the decision that Romney disagreed with the court’s tax label. But Romney reversed course Wednesday and said the court got it right: The federal fine is a tax, while the state’s is not.
Whatever it is called, the fine for not having insurance in Massachusetts is collected by the Department of Revenue through tax filings. For the fiscal year that ended last month, the fines brought in more than $20.6 million. Nationally, the Internal Revenue Service will handle collection through tax filings.
While the penalty garnered a lot of attention during legal challenges, Weil said, it is more of a backstop than the primary means of expanding coverage.
“The concept of the mandate was never to force everyone” to buy insurance, he said. “It was set in a whole system where everyone has an option and then you say, ‘You know what, we need you to pick one.’”
The penalty alone did not prompt Machado to buy insurance, which cost him $70 a week, far more than the fine. Coverage gave him access to a primary care doctor, who discovered during a physical that Machado had a latent form of tuberculosis. Though not contagious, Machado was at risk for complications as he aged.
“If I didn’t have insurance, I wouldn’t have known I was sick,” he said.
Treatment made him weak, prompting his shift to part time and loss of coverage. He has an application pending for a state-subsidized plan. Still, Machado said he thinks the tax penalty for the uninsured is fair.
“I know it’s very expensive for me and for the government if I get sick,” he said.
About 67,000 people were fined for not having coverage in 2007, the first year of the penalty. That figure dropped to 44,000 in 2010, according to a state report released last month with the most recent data. Since the recession, the state has waived the fine for more people on the grounds that they could not afford health plans available to them, accounting for some of the decline.
More than half of those who paid the tax penalty were uninsured for the full year, the report said. Most were under age 40.
In Massachusetts, the penalty is set at up to half the cost of the lowest-priced plan available through the state-run insurance market. It kicks in when someone has been uninsured for more than three consecutive months. Annual penalties for 2012 range from $228 to $1,260, depending on income and age.
Nationally, the penalty is determined through a more complicated formula. It will start in 2014 at $95 or 1 percent of an individual’s income that year, whichever is higher, rising in the following years but with certain caps. In 2016, the tax penalty will be the higher of $695 or 2.5 percent of a person’s income.
That means federal penalties will be larger than the state’s for many people. The state has not determined what will happen to its penalty structure under the federal law, said Richard Powers, spokesman for the Massachusetts Health Connector Authority, one of the agencies overseeing compliance with the Affordable Care Act. The Legislature may decide the issue, he said.
For many across the country, paying the penalty may be less expensive than buying coverage. But the penalty is money lost, while people ostensibly get something in return for buying coverage.
Plus, people in this “God-fearing, tax-paying society” are prone to obey the law, said Amitabh Chandra, a health economist at the Harvard School of Public Health.
“It’s really the moral suasion of the mandate and the fear of the tax that gets people to comply with it,” Chandra said.
Erica Brunner of Jamaica Plain was 27 and working as a waitress in Brookline when she went without insurance for about five months in 2011. Her employer offered coverage, but at about $200 per month, she could not afford the employee contribution, she said. She knew she would be fined come tax time and paid a penalty of about $68.
Now, she works as a grant coordinator for Health Care for All, a consumer advocacy group that helps people — Machado among them — get coverage. She said she often talks with friends about options for coverage to avoid the penalty.
“I know what it’s like to be young and underemployed and be confused about what was available,” said Brunner, who enrolled in her new employer’s health plan because the nonprofit covered more of the premium and she had a larger, stable paycheck.
Joshua Archambault, director of health care policy at the Pioneer Institute in Boston, said other states should be wary of using Massachusetts’s experience as a benchmark. Massachusetts had a high rate of coverage before the 2006 state health law took effect, about 94 percent among adults not enrolled in Medicare compared with about 98 percent today, according to a state survey. Culturally, coverage is expected here, Archambault said.
“I think a 30-year-old in Massachusetts, because of cultural, political, and economic reasons, is probably going to view the value of insurance very differently than a cattle hand in Texas,” he said.