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State residents get breather on tax penalty

E-mail | Print | Comments () Posted by Kay Lazar January 15, 2009 02:40 PM

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Amid the grim economic news these days, there is one bright note for Massachusetts residents who have been scrambling to get health insurance.

New state rules expand the time, from 63 to 90 days, that a resident may go without health insurance coverage before facing a state tax penalty.

Jamie Katz, general counsel for the Commonwealth Health Insurance Connector Authority, the board that oversees the state's mandatory system of health insurance, said the change will mean more people will avoid the penalty, especially during these times of high unemployment. Most people get their health insurance through their employer.

"We believe that this is an appropriate and generous gap," Katz said today, following the board's meeting.

Under the state's 2006 overhaul of the health insurance system, nearly everyone is required to have coverage, or face a tax penalty for the amount of time they were not covered. The penalty in 2007, the first full year of the new rules, was $219, but that figure has increased substantially since then. The maximum penalty for 2008, which residents will face when they file taxes this spring, is $912. Next year, the maximum will be $1,068

Of the 3.9 million who filed tax returns for 2007, fewer than 2.5 percent, or about 67,000, were judged to be subject to the tax penalty, according to Katz. Of those 67,000, 7,160 taxpayers appealed the fine, yet more than half of them -- 4,700 -- failed to follow through on the appeal process, Katz said.

He said he expects many more to appeal this year, given that they face a substantially larger tax penalty for noncompliance.

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About white coat notes

White Coat Notes covers the latest from the health care industry, hospitals, doctors offices, labs, insurers, and the corridors of government. Chelsea Conaboy previously covered health care for The Philadelphia Inquirer. Write her at cconaboy@boston.com. Follow her on Twitter: @cconaboy.

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