Understand the Massachusetts Health Insurance Penalty

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The Massachusetts health insurance penalty applies to most adult residents of the state age 18 and older who don't carry health insurance that meets minimum coverage standards. These standards are known as minimum creditable coverage. 

Under the Massachusetts Health Care Reform Law, if the state says you're able to afford health insurance but you don't buy it, you're charged tax penalties for each month during the year that you're without coverage. Individuals who fall below certain income thresholds aren't penalized.  

Reporting Health Insurance Information on Your Massachusetts Tax Return

Massachusetts residents and some part-time residents must file Schedule HC with their state tax returns. This form reports information regarding your health insurance coverage during the year. If you have private health insurance, your insurer should send you a Form MA 1099-HC, providing you with the information you'll need to fill out Schedule HC.

Affordable Insurance

Check the state’s health insurance website, the Massachusetts Health Connector, known around the state as the Connector. It's an independent state agency that helps Massachusetts residents find affordable health insurance coverage so they can avoid the Massachusetts health insurance penalty. The Connector offers low-cost and even no-cost plans that meet minimum coverage standards and have the state’s seal of approval for quality and affordability.

Limits on Tax Penalties

If you owe a penalty for lack of insurance, you must pay it with your Massachusetts income tax return. By law, penalty amounts cannot exceed 50% of the least costly monthly insurance premium you would have qualified for through the Connector. A gap in insurance coverage of 63 days or less is not penalized, provided the days are consecutive. 

The state establishes affordability standards each year that determine whether individuals and families can afford health insurance. If you cannot afford health insurance according to these standards, you're not subject to Massachusetts health insurance penalties. This provision generally covers those with incomes at or below 150% of the federal poverty level. You can apply for a Certificate of Exemption through the Connector website. The certificate serves as proof that you are exempt from penalties due to your inability to afford the required insurance coverage.

Exemption for Religious Beliefs 

A religious exemption is available for anyone whose faith provides a basis for not purchasing health insurance coverage. But beware -- if you are claiming a religious exemption from the Massachusetts health insurance penalty and you received medical care during the tax year, such as an emergency room visit, you may be subject to a penalty anyway if it is determined that you could have afforded health insurance. Preventative dental care, vaccines and physical exams required by your employer or other third party are not considered medical care for purposes of this exemption.

Massachusetts Health Care Reform and the Affordable Care Act

The Massachusetts Health Care Reform Law predated the Affordable Care Act, and the ACA and Massachusetts law now work in tandem to some extent. Generally, if you're compliant with the ACA, you're not subject to the Massachusetts health insurance penalty. You can qualify for ACA subsidies through the Connector.

Massachusetts expanded its Medicare program under the ACA, so if you earn less than 133% of the federal poverty level, you may be able to get coverage through the state, called MassHealth. This opens up another option for some taxpayers to avoid the penalties.