Massachusetts has an “individual health insurance mandate” which requires most adults to carry health insurance if it is affordable to them and that meets certain coverage standards (referred to as “Minimum Creditable Coverage” or MCC). The Massachusetts Health Connector sets the coverage and affordability standards, and the Massachusetts Department of Revenue (DOR) administers the requirement via the state tax filing process. Please note that the standards described here are specific to the Massachusetts health reform law (not the Affordable Care Act, the federal health reform law).
Background of the Individual Mandate
Since the passage and implementation of the state’s 2006 health reform law, Massachusetts has achieved and maintained the highest levels of insurance in the nation. The individual mandate is one aspect of the shared responsibility among government, employers, and individuals that drove this success. The individual mandate requires adults to carry health insurance if it is affordable to them and meets the Commonwealth’s coverage standards.
Minimum Creditable Coverage (MCC)
Minimum Creditable Coverage (MCC) refers to the minimum level of benefits that adult tax filers need to carry in order to be considered insured and avoid tax penalties in Massachusetts.
For most plans, MCC standards include:
- Coverage for a comprehensive set of services (e.g. doctors’ visits, hospital admissions, day surgery, emergency services, mental health and substance abuse, and prescription drug coverage)
- Doctor visits for preventive care, without a deductible
- A cap on annual deductibles of $2,000 for an individual and $4,000 for a family
- For plans with up-front deductibles or co-insurance on core services, an annual maximum on out-of-pocket spending of no more than the annual limit set by the IRS for high deductible health plans. In 2016, out-of-pocket costs are limited to $6,850 for an individual plan and $13,700 for a family plan
- No caps on total benefits for a particular illness or for a single year
- No policy that covers only a fixed dollar amount per day or stay in the hospital, with the patient responsible for all other charges
How to Know if Your Plan Meets MCC
Massachusetts-licensed health insurance companies must put an MCC-compliance notice on their plans sold in Massachusetts to indicate if the plan does or does not meet MCC. Most plans sold in Massachusetts meet the MCC standards. Every year in January, insurers send Form MA 1099-HC to indicate whether insurance met MCC requirements and the months in which an enrollee was covered. Taxpayers should save this Form 1099-HC and use it when filing their state taxes.
Below is a list of plans that automatically meet MCC requirements:
- Medicare Part A or B;
- Any Qualified Health Plan purchased through the Massachusetts Health Connector or directly through an insurance carrier, including catastrophic plans;
- A federally-qualified high deductible health plan (HDHP);
- A Student Health Insurance Plan (SHIP) offered in Massachusetts or another state;
- A tribal or Indian Health Service plan;
- The U.S. Veterans Administration Health System;
- A health insurance plan offered by the federal government to federal employees or retirees; or
- Peace Corps, VISTA or AmeriCorps or National Civilian Community Corps coverage.
For years before 2014, you automatically meet MCC if you were enrolled in:
- Any Commonwealth Care, Commonwealth Care Bridge plan
- Any Commonwealth Choice plan (including Young Adult Plans)
MCC Certification for Employers, Unions, Plan Sponsors and Insurers
Employers, unions, plan sponsors, and insurers can apply for MCC Certification if they have a comprehensive plan that does not quite meet all MCC requirements. They must identify how the plan deviates from the MCC standards. The relative value of the benefits should be at least comparable to a Bronze-level Health Connector, Qualified Health Plan. The MCC Resources box at top right has the documents you need to apply for MCC Certification. You must call 617-933-3030 if you plan to file fifty or more applications.
Administration and Enforcement of the Individual Mandate
Taxpayers are required to report on whether they were insured by completing a form called a Schedule HC, Health Care Information, when they file their state taxes with the Massachusetts Department of Revenue. To assist taxpayers in completing Schedule HC, insurers (including MassHealth), the Massachusetts Health Connector, and certain employers, are required to provide Form MA 1099-HC statements by January 31. These forms will have the necessary information to complete Schedule HC.
If an individual has been insured throughout the year in a plan that meets MCC standards, that individual will report these facts on the Schedule HC and will not be subject to a penalty. Individuals who have periods without coverage will have to complete additional parts of the Schedule HC to determine whether they had affordable coverage available to them that they could have purchased.
The Health Connector sets an “Affordability Schedule” each year, which shows the maximum monthly premium that an individual could afford to pay for insurance. The “affordable” premium varies for each income bracket. If an individual could have purchased coverage meeting MCC standards for a monthly premium that is equal to or less than the amount that an individual is able to afford, then the individual may be subject to a penalty.
The Schedule HC will ask taxpayers who did not have coverage to provide information to determine if they were eligible for government-subsidized insurance or affordable insurance offered by their employer. If neither of those options was available, the taxpayers will be directed to check a table of premiums for the lowest-cost coverage available through the Health Connector in the tax year. If the premium that the taxpayer would have to pay for that coverage is greater than the amount the taxpayer is considered able to afford, then the taxpayer will not have to pay a penalty. However, if the premium for coverage is equal to or less than the amount the taxpayer could afford, then the taxpayer could have purchased that insurance and may be liable for a penalty.
Gaps in Coverage
Individuals can have up to three consecutive months without penalty. Thus, taxpayers who lose but then resume their coverage within three or fewer consecutive calendar months will not be subject to penalties for lack of health insurance coverage.
Penalties for Tax Year 2018 for Non-Compliance with the Individual Mandate
For individuals that are determined liable for a tax penalty for non-compliance with the state’s individual mandate, the below penalty schedule applies.
|150.1-200% FPL||200.1-250% FPL||250.1-300% FPL||Above 300% FPL|
* Compare individual’s annual family household income to chart immediately below to determine applicable Federal Poverty Level (FPL).
** Yearly penalty amounts listed above based on non-compliance for entire year.
Federal Poverty Level – Annual Income Standards
|Family Size||150% FPL||200% FPL||250% FPL||300% FPL|
|For each additional person add:||+$6,270||+$8,360||+$10,450||+$12,540|
*This schedule reflects the 2017 Federal Poverty Level standards (for 2018 eligibility).
Information on Appealing a Penalty
You can appeal the penalty if you are subject to a tax penalty because you could have afforded insurance but didn’t purchase it, but still believe that you could not have purchased insurance due to a hardship or other circumstances. Instructions for the Schedule HC provide information on grounds for appeals. Please read the Schedule HC Instructions carefully if you want to appeal.
If you appeal, you must fill in the oval requesting the appeal on the Schedule HC. The appeal will be heard by the Massachusetts Health Connector. You will receive a follow-up letter from the Health Connector asking you to state your grounds for appeal in writing and submit supporting documentation. Failure to respond to that form within the specified time frame will lead to dismissal of your appeal. You may be required to attend a hearing on your case in person or by telephone. No penalty will be imposed by DOR pending the outcome of your appeal. If your appeal is denied by the Health Connector, you will receive a bill from DOR.