Health-care reform: How has the individual mandate worked in Massachusetts?

There was a moment some 5-1/2 years ago when Peter Kastner looked at his monthly health-insurance bills and wondered whether breaking the law might make more sense.

He and his wife were using a high-deductible plan with a $400 monthly premium, but it didn’t comply with the landmark 2006 law that transformed health insurance in Massachusetts. Paying the tax penalty for not complying was almost more economical than the policies he found through the state-run insurance exchange program. 

After three months, the Kastners decided that the risks associated with catastrophic insurance were too much, and they opted for coverage through his former employer at $800 a month. When that coverage ran out, monthly premiums under a new, state-approved policy jumped: By December 2009, their Blue Cross Blue Shield premiums were $1,125, then leapt to $1,425 in 2010. They now stand at $1,806.

“It’s unaffordable, it’s ridiculous, and it’s absurd,” says Mr. Kastner, a technology consultant in his mid-60s who lives in Westport, Mass. “I can’t wait for us to get on Medicare.”

Kastner’s complaint illustrates the enormous uncertainty over the Affordable Care Act now that the US Supreme Court has cleared the way for its 2014 start date. For many, the linchpin of the law – the mandate that individuals obtain health insurance – is also the focus of the greatest doubt: What if getting health insurance just isn’t economical?

In Massachusetts, the rough idea behind the individual mandate is that having more healthy people paying for insurance will help defray costs for unhealthier people to have insurance. It should also pay for other insurance requirements such as covering preexisting conditions.

State data show that since Republican Gov. Mitt Romney signed the law, 439,000 more people, out of a state population of 6.6 million, have signed up for insurance. Having the highest rate of insured individuals in the country is now touted by state political leaders as having clear economic benefits.

“Massachusetts health-care reform has become a competitive advantage, attracting young people and entrepreneurs who know they can come here and take a chance on a new company and still have access to the best care in the world,” Gov. Deval Patrick, a Democrat who succeeded Mr. Romney, said after the Supreme Court issued its decision on June 28.

Even before the law took effect, more than 90 percent of Massachusetts’ eligible population had some coverage. And polls show a solid majority of residents consistently supporting the law over the years.

In Texas, by contrast, about 27 percent of residents do not have insurance, the highest share in the country. Texas Gov. Rick Perry (R) announced this week he would refuse to expand Medicaid or set up an insurance exchange to help consumers shop for policies.

The Affordable Care Act “is a really, really good deal for places like Texas that have historically not provided good access for its women, children,” says Robert Greenwald, director of Harvard Law School’s Center for Health Law and Policy Innovation in Boston. “When they move away from the political aspects and they look at the needs of their citizens, they will see that this is an incredibly good deal.”

To push people to get insurance, the federal law imposes a tax on those who refuse to get it (the Obama administration has argued it is a penalty, not a tax). In Massachusetts, people must show they have “minimum creditable coverage”– or face a monthly penalty equal to 50 percent of the least costly insurance premium, depending also on age and income.

For 2012, the highest penalty works out to be $105 a month, or $1,260 a year, according to state data, which is up from $93 a month, or $1,116 a year in 2010. The penalties have reaped $87 million for state coffers since the law’s inception – $20.6 million of that coming in 2012, the most of any year to date.

For tax year 2010, the most recent available data, about 44,000 people were hit with the penalty, according to the state Department of Revenue. That’s down from 67,000 people in 2007, the first year it was assessed. Of those who paid the penalty, more than half were uninsured for the full year, and most were under the age of 40.

Nationally, most observers expect adoption of the individual mandate and related provisions to be more problematic, given that few other states have anywhere close to Massachusetts’ levels of insured individuals. The federal penalty, which goes into effect Jan. 1, 2015, is larger than Massachusetts’: an annual levy of $95 or up to 1 percent of a person’s income – whichever is greater. That rises by 2016 to a minimum of $695 or 2.5 percent of income, or $2,085 for families.

About 4 million uninsured people could end up paying the federal penalty in 2016, the Congressional Budget Office has estimated. There will be hardship exemptions and limited religious exemptions. In Massachusetts, which has somewhat similar provisions, officials have granted penalty waivers to 65 percent of the people who asked for them.

For lower-income people, tax subsidies are expected to help defray costs, and for the lowest brackets, the law pushes for expanded Medicaid access. But for people who don’t fall in those categories, like the Kastners, getting insurance deemed adequate could be complicated and, at least initially, costly.

“It’s just that in this country, ‘try to do the right thing’ has just gotten too ... expensive. It’s not economically feasible anymore,” Kastner says. “Not only is it hugely expensive, but you have difficult choices with large economic consequences, and there isn’t always a ‘Health Care for Dummies’ book right in front of you.”

The larger question, says Joshua Archambault, health-care policy director for the Pioneer Institute, a think tank in Boston, is not about health care at all, but about the proper role of government in people’s lives.

“It’s a symptom of a wider problem – that is, of the government’s role, intervention in our lives,” he says. “And [opponents] see this as the first of possibly many things the government is making us do that we don’t want to do.”