Health insurance administrators report fielding a rush of Island residents before a Jan. 1 state deadline that requires all commonwealth residents to have coverage.

Under the health reform law, signed by former Gov. Mitt Romney in April 2006, people without health coverage in 2007 will lose their individual personal income tax exemption, which amounts to a penalty of $219. State residents will not face the penalties until 2008 when they file their tax returns for the current calendar year.

But under draft regulations released by the Massachusetts Department of Revenue this week, the penalty could quadruple to $912 the following year.

Henry Dormitzer, commissioner of the department of revenue, said this week that the increased penalties are part of state’s ongoing effort to ensure everyone in the state has health insurance. He said the health insurance reform law has already prompted 300,000 previously uninsured residents to obtain coverage.

Sarah Kuh, program director for the Vineyard Health Care Access Program, confirmed that a large number of Island residents have scrambled to obtain health insurance in recent months in time for the Jan. 1.

She said participation in the health care access program, which assists Island residents to obtain affordable government subsidized health care, has increased steadily in recent years with the advent of the state health insurance reform act. In the last fiscal year, the program processed 1,717 individual and 1,133 Island household applications, a sharp increase from the 1,303 individual and 815 household applications in the previous year.

The health care access program was created in 1999 to address the high number of medically uninsured people on the Vineyard — including a large number of children.

Although the number of new applications for the past few months has yet to be tallied, Ms. Kuh estimated that several hundred people in November and December inquired or applied for insurance through the health care access program.

The program connects people with a variety of affordable insurance options based on a variety of factors including income, age and number of family members. The programs include MassHealth, Commonwealth Care, Health Safety Net and Healthy Start for pregnant women.

Ms. Kuh said she supports the state health reform law, but feels it is not the perfect solution.

“It’s a step in the right direction. There is no question the law will improve people’s lives. But it’s not the perfect fix — [the law] establishes a very complicated system a lot of people don’t understand, and for good reason,” she said.

She said the initial penalty for no health insurance may not be enough to persuade people to seek coverage, and other glitches have already surfaced here on the Vineyard. For example, customers who were previously enrolled in other affordable health insurance programs are now stuck in those programs and cannot enroll in other programs that often offer premiums at half the cost.

“There are going to have to be some adjustments, but I don’t think it is anything that cannot be fixed,” she said.

But overall, she said, the health reform law has a tremendous up side and may serve as an example for the rest of the nation.

“We know other states are watching to see how this program works . . . [the law] has already been an amazing catalyst for health care reform across the nation,” she said.

Nancy Gardella, executive director of the Martha’s Vineyard Chamber of Commerce, said several Island employers contacted the chamber to inquire about a special group insurance program after the state-mandated deadline was announced last year.

Ms. Gardella said she supports the state health reform law, but agrees it can be confusing — especially for small businesses offering health insurance for the first time. “I have heard that there is still a good deal of confusion as to what plans [employers] can offer their employees. But I don’t think there is any question that [this law] will mean that more people have health insurance in the end,” she said.

Under the law businesses with 11 or more full-time equivalent workers are required to offer health insurance or pay a fine. By law employers are barred from offering better benefits to higher wage-earning workers than to their lower-earning colleagues. Workers with access to insurance through their employers are barred from obtaining state-supported coverage and will be excluded from the state’s free care program beginning in April.

Cape and Islands Rep. Eric T. Turkington is another proponent of the health care reform act, but described it as a work in progress. With the state-mandated deadline and more robust financial penalties on the horizon, he said, the next few years may prove to be a period of learning and adjustments.

“I think the next few years will be more of a test then anything. I’ll be the first to admit that in a perfect world you would never create a system like this. But considering that we already have a health insurance system driven by employers [providing coverage] this is the best system we can come up with,” Mr. Turkington said, adding:

“It gets us closer to where we want to be: health insurance for everyone — no matter what.”

Cape and Islands Sen. Robert A. O’Leary agreed.

“We have operated too long under a system where so many people go without health insurance. I hope this law can be a starting point for change,” Mr. O’Leary said.