Insurance Mandate Penalty Bite on '09 Tax Returns

The Department of Revenue sent out this notice about how it will calculate tax penalties for failure to have health insurance next year. I've added a few links. DOR's penalty information for this tax year ('08) is here.Penalties for 2009 will continue to apply only to adults ages 18 and over who can afford health insurance, based on separate standards adopted by the Board of the Commonwealth Health Insurance Connector Authority on an annual basis. By statute, the penalties must not exceed one-half of the monthly cost of the least expensive health insurance plan available to an individual through the Health Connector.

In 2009, individuals must be enrolled in health insurance policies that meet minimum creditable coverage standards defined in regulations adopted by the Commonwealth Connector. The penalties in 2009 will accrue for each month of non-compliance with the individual mandate. However, there is a grace period permitting lapses in coverage of no more than 63 consecutive days.

The maximum penalty for tax year 2009 will be $89 a month ($1,068 for an entire year of non-compliance) for a person 27 or older with income over 300 percent of the federal poverty level ($31,212 or more for singles). The 2008 penalty for this same individual was $76 per month or $912 per year. The maximum penalty increased slightly compared to 2008 due to slight increases in health plan prices and the requirement that individuals have prescription drug coverage as of Jan. 1, 2009.

The penalty for those with incomes over 300 percent of the federal poverty level and ages 18-26 will be $52 per month ($624 per year).

To ensure simplicity and fairness in the penalty guidelines, 2009 penalties for individuals with incomes up to 300 percent of the federal poverty level will be the same as those in 2008.

Individuals with incomes up to 150 percent of the federal poverty level ($15,612 for singles) will face no penalty, as Commonwealth Care is free at this income level.

The penalty for those with incomes between 150.1 percent and 200 percent of the federal poverty level ($15,513-$20,808 for singles) will be $17 per month ($204 annually).

The penalty for those with incomes between 200.1 percent and 250 percent of the federal poverty level ($20,809-$26,016 for singles) will be $35 per month ($420 annually).

The penalty for those with incomes between 250.1 percent and 300 percent ($26,017-$31,312 for singles) of the federal poverty level will be $52 a month ($624 annually).

Penalties for married couples who can afford but who do not enroll in health insurance will equal the sum of the penalties for each spouse.

The penalty guidelines are being issued as a working draft to allow the public the opportunity to submit written comments to the Department of Revenue. Comments can be emailed to the Department’s Rulings and Regulations Bureau at rulesandregs@dor.state.ma.us by January 23, 2009.