State regulators to consider revamp of health insurance rule

State regulators today said that they will likely overhaul the complex formula they use to determine how many Massachusetts residents face a tax penalty for not having health insurance because spiraling costs are making coverage unaffordable for too many people.

The Connector Authority board annually updates the formula it uses to determine whether health insurance is affordable for individuals, couples and families, and that standard is also used to decide who will face a tax penalty for not having coverage.

The state's landmark 2006 health law requires nearly everyone to have health insurance or pay a stiff tax penalty.

But several board members said that since 2006, insurance costs have risen much faster than incomes. The affordability formula the board uses is pegged to income and the cost of health insurance plans that are available in each region.

"We need to look at how the percentage of income we are asking people to contribute to insurance has changed over time," said member Nancy Turnbull, an associate dean at Harvard's School of Public Health.

"Health care costs and premiums keep going up," Turnbull said, "and we will rapidly approach a cost that is beyond what everyone is willing to pass on."

Turnbull and others said it would be more fair to instead link the formula to the percentage of income a resident is paying toward health insurance. That is similar to the national approach proposed by President Obama and the U.S. Senate.

In the past, some board members have worried that loosening the rules too much would undermine the state's health law, because it will result in fewer people being required to purchase health insurance. A major goal of the state's 2006 law was to extend coverage to as many residents as possible.

Connector chairman Jay Gonzalez, who is also the Patrick administration's secretary for administration and finance, said the board will begin studying a potential change in its formula.

"We need to take a fresh look at this," Gonzalez said, "to try to develop a more rational approach."

The board voted to make just modest tweaks in this year's formula for people who make more than three times the federal poverty level, which translates to $32,496 annually for an individual. The vast majority of people who get insurance through their employer are unlikely to be affected by the change.

The thousands of people who receive state-subsidized insurance through Commonwealth Care will not face any premium increases this year.