The Massachusetts plan hinges in part on two key sections: the $295-per-employee business assessment and a so-called 'individual mandate,' requiring every citizen who can afford it to obtain health insurance or face increasing tax penalties.

The plan -- approved just 24 hours after the final details were released -- would use a combination of financial incentives and penalties to dramatically expand access to healthcare in the next three years and extend coverage to the state's estimated 500,000 uninsured.

If all goes as planned, poor people will be offered free or heavily subsidized coverage; those who can afford insurance but refuse to get it will face increasing tax penalties until they obtain coverage; and those already insured will see a modest drop in their premiums.

The measure does not call for new taxes but would require businesses that do not offer insurance to pay a $295 annual fee per employee.

Governor Will Sign

The cost was put at $316 million in the first year, and more than $1 billion by the third year, with much of that money coming from federal reimbursements and existing state spending, officials said.

The House approved the bill on a 154-2 vote. The Senate endorsed it 37-0.

A final procedural vote is needed in both chambers of the Democratic-controlled legislature before the bill can head to the desk of Gov. Mitt Romney, a potential Republican candidate for president in 2008. Romney spokesman Eric Fehrnstrom said the governor would sign the bill but would make some changes that wouldn't "affect the main purpose of the bill."

Legislators praised the effort.

'Let's Do Both'

"It's only fitting that Massachusetts would set forward and produce the most comprehensive, all-encompassing healthcare reform bill in the country," said House Speaker Salvatore DiMasi, a Democrat. "Do we know whether this is perfect or not? No, because it's never been done before."

The only other state to come close to the Massachusetts plan is Maine, which passed a law in 2003 to dramatically expand healthcare. That plan relies largely on voluntary compliance.

"What Massachusetts is doing, who they are covering, how they're crafting it, especially the individual requirement, that's all unique," said Laura Tobler, a health-policy analyst for the National Conference of State Legislatures.

"The novelty of what's happened in this building is that instead of saying, 'Let's do neither,' leaders are saying, 'Let's do both,' " said John McDonough of Health Care for All. "This will have a ripple effect across the country."

The plan hinges in part on two key sections: the $295-per-employee business assessment and a so-called "individual mandate," requiring every citizen who can afford it to obtain health insurance or face increasing tax penalties.