About 500 companies will pay for not insuring workers

By Alice Dembner, Globe Staff

Some 518 moderate or large Massachusetts companies -- out of tens of thousands -- will pay the state a small penalty rather than offer health insurance to some of their workers, the state announced today.

State officials and business leaders called the small number of penalty payers a positive sign for the state's effort to ensure that every resident has coverage. But healthcare advocates said it reflects the weak requirement for business participation set by the administration of former Governor Mitt Romney.

Either way, the state will collect only about $5 million in penalties, far less than the $24 million budgeted, which could result in another budget shortfall for healthcare reform.

Lawmakers authorized the penalty -- of up to $295 per employee per year -- to help subsidize state insurance for low-income state residents and to spread financial responsibility for the coverage initiative among individuals, government and businesses.

Under the health insurance law, passed last year, individuals are required to obtain coverage or face their own penalty. Companies with 11 or more full-time-equivalent employees face a fine unless they pay for insurance for at least one-quarter of their workers or offer to pay at least one-third of employees' individual premiums.

To enforce the law, the state required about 62,000 companies to report by Nov. 15 whether they met the insurance standard. Nearly 44,000 filed, but more than half were too small to face the insurance requirement and almost all of the rest said they provided insurance.

"This is unequivocally good news," said Senate President Therese Murray, one of the architects of the law, in a statement. "Employers are obviously doing their part, and individuals are also taking their responsibility seriously."

House Speaker Salvatore DiMasi, who had originally pushed for a payroll tax on employers who did not provide insurance, said the filings showed businesses were taking the idea of shared responsibility to heart.

But advocates said the small number of companies paying the penalty showed that businesses were not carrying a fair share of the burden.

"If I offer to pay one-third of the premuim and none of my employees take up the offer, I escape liability under the law even if I’m not covering anybody," said John McDonough, executive director of Health Care for All, a Boston-based advocacy group. "We do believe there are lots of employers out there who are stepping up their responsibility, and strongly suspect there are employers who are noncompliant or gaming the system."

"This means that taxpayers are carrying and will carry a larger than anticipated burden," he added.

When the bill was signed, the Legislature had estimated that the "Fair Share" penalty on businesses would bring in $45 million last year and another $36 million this fiscal year.