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More get waivers of health insurance

State panel cites economy as factor Flexibility called model for US plan

By Kay Lazar
Globe Staff / February 7, 2011

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Massachusetts regulators granted more exemptions last year to residents who said they could not afford the health insurance required by the state, waiving the tax penalty for more than half of those who appealed, according to state data.

Of the 2,637 people who applied, 63 percent received an exemption with 107 cases pending, up from 44 percent the previous year.

State officials said they excused the majority of waiver applicants in large part because of the protracted sour economy, which made insurance unaffordable for more people. Under the 2006 state law that requires most residents to have coverage, regulators have significant latitude to authorize waivers by taking into account factors such as a home foreclosure.

The number of people seeking exemptions in 2010 was about the same as in 2009, and state figures show that roughly 98 percent of residents were insured last year.

Even as Republicans and many states wage a bitter battle in Congress and the courts to block the mandatory insurance requirement in the national health care law, the provision appears to retain broad acceptance in Massachusetts.

Regulators’ flexibility may be part of the reason.

“We aren’t going to make someone pay just to make them pay,’’ said Celia Wcislo, a director of 1199SEIU United Healthcare Workers East and a member of the Connector Authority, which oversees Massachusetts’ health care law and grants the exemptions.

“It’s about making sure as many people are insured as possible, and not about the punishment,’’ she said.

Like Massachusetts, the national law lists some reasons that would allow consumers to avoid the annual tax penalty for failing to have insurance. But it leaves ultimate authority to the Department of Health and Human Services to draft more detailed guidelines for each state’s regulatory board to use in ruling on a case-by-case basis.

“There are lessons to be learned from Massachusetts,’’ said Michael Miller, policy director at Community Catalyst, a Boston-based national health advocacy group. He said the state’s experience illustrates that regulators can be flexible in granting hardship exemptions, if the overall compliance rate is high.

Most of the remaining uninsured are among the state’s poorest, with incomes below 300 percent of the federal poverty level — $66,150 for a family of four. That is prompting regulators to take a fresh look at how Massachusetts defines affordable when it comes to mandatory health insurance and whether some of the rules need to be tweaked.

They’re also trying to figure out how the state’s rules might mesh with the year-old national health care overhaul, which is largely modeled on the Massachusetts law and will require most Americans to have coverage by 2014 — if the legal and legislative challenges fail.

Among those granted a waiver was Ralph Ross, a 49-year-old Hyde Park resident who said he could not afford insurance for himself, his wife, and three children on his $67,000 salary as a Walpole teacher in 2008. The monthly premium of the plan the town offered was $310.

His request was initially denied by the Connector, but after appealing the decision in court, Ross was granted a waiver when he provided copies of utility shutoff notices he received, one factor regulators can consider.

Geoffrey Kula, 39, a Boston writer, was less fortunate. Kula was out of work for most of 2008 and collected unemployment. State records show he was eligible for state-subsidized health insurance because he was unemployed, but he failed to sign up.

The records also show that, between his unemployment checks and the few months he did work, Kula had an income of about $37,500 — which should have been enough for him to afford private health insurance costing about $200 a month, according to state rules.

But Kula said he has struggled to pay for his monthly $1,600 mortgage and condo fees, food, utilities, and other expenses.

“I would like to have health insurance, but it’s sort of a luxury I can’t afford right now,’’ he said.

The Connector reviewers disagreed. Kula appealed, filing a lawsuit in Suffolk Superior Court. He lost and now owes a tax penalty of $912, plus other fees. He is one of just 12 people who filed lawsuits to appeal waiver denials, according to state records.

The vast majority of residents who don’t have health coverage don’t file for an exemption. In the first year, only about 4 percent of the 60,000 people assessed a tax penalty for lack of coverage applied for an exemption. The second year, it was about 5 percent.

Regulators use a formula, largely based on income levels, to determine whether someone should be able to afford health insurance. But they also consider whether someone is battling foreclosure or utility shutoffs, or if they endured a significant home fire or flood. Connector Authority officials said the increase in waivers last year was driven not just by the economy but by changes to the rules for minimum benefits, which meant some people with insurance didn’t realize their coverage no longer met state standards.

This year, consumers without an exemption will face a tax penalty as high as $1,116 if they were uninsured for all of 2010.

Massachusetts residents with the lowest family incomes, less than $33,075 for a family of four, make up the largest share — 43 percent — of the uninsured, according to state data. The law prohibits many of them from getting state assistance because their employer offers insurance and contributes at least 33 percent toward that coverage. A Connector committee is studying whether this rule is hindering coverage for the working poor.

“We may want to let them in [to government subsidized health insurance], but it would cost money, and we would have to decide if the state wants to spend money that way,’’ said committee member Jonathan Gruber, an economics professor at the Massachusetts Institute of Technology.

Gruber said the committee is also considering whether Massachusetts should adopt some of the rules from the national law before it takes effect in 2014. The national law would allow workers to forgo workplace coverage if it costs more than 8 percent of their income. Instead, they could use the money their employer would have contributed toward insurance to help them buy coverage on their own.

The committee is expected to make its recommendations by early March.

Kay Lazar can be reached at klazar@globe.com.