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Backers hope the bill, set to be voted on by the House and Senate Tuesday, will establish a national model for other states grappling with how to provide insurance to more of their citizens.

It also must withstand the scrutiny of Gov. Mitt Romney, a Republican who has expressed concern about a key funding element in the legislation. Romney voiced support for the bill Monday.

House Speaker Salvatore DiMasi and Senate President Robert Travaglini announced the agreement during a Statehouse news conference, wrapping up months of contentious closed-door negotiations.

DiMasi called the bill "historic."

"We will be able to, in three years, hopefully, virtually insure every man, woman and child in this commonwealth of Massachusetts," DiMasi said. "We have the most comprehensive package that, I think, will be the model for the rest of the country."

A key portion of the bill requires businesses that don't offer insurance to pay a $295 dollar per-worker assessment. The assessment was an early sticking point between the two versions of the bill.

Another section of the massive 145-page bill requires all residents to be insured beginning July 1, 2007, either by purchasing insurance directly or obtaining it through their employer.

Those who can afford to buy insurance, but refuse, will face increasing tax penalties, first losing the ability to claim their personal exemption when filing their state taxes, a loss of about $150 per individual.

If they still refuse the next year, they will be assessed half the cost of one of the new, low cost health plans -- an annual penalty of about $1,200, according to Sen. Richard Moore, D-Uxbridge, Senate chairman of the committee that worked out the final language for the bill.

To help people find insurance, Massachusetts will establish the Commonwealth Care Health Insurance Program, which will enable low-income families and adults to buy insurance with no deductible. Premiums will be scaled based on income.

Romney praised the legislation saying it will guarantee every Massachusetts resident will have health insurance using reforms to the marketplace rather than a big new government program.

"We are on track to do something historic, truly landmark, a once in a generation opportunity," said Romney, a possible candidate for the 2008 Republican presidential nomination.

Romney, who has pledged not to sign broad-based tax increases, said it made sense to require businesses that don't offer insurance to pay the $295 assessment, which he called an improvement over an earlier, payroll tax proposal.

"It makes sense to expand this assessment to beyond those that just currently offer insurance," said Romney. "It's not a tax. It's not a broad-based program."

Romney communications director, Eric Fehrnstrom said the governor was only pointing out that the assessment was different from the payroll tax plan.

"He has not made any decisions about potential vetoes or areas that he might seek to change through amendment," Fehrnstrom said.

The estimated cost of the bill includes $316 million in new spending in the first year. That will rise to more than a $1 billion in the third year, much of that money coming from federal reimbursements and by redirecting existing spending.

One goal of the bill is to protect $385 million pledged by the federal government over each of the next two years if the state can show it is on a glideslope to reducing its number of uninsured. The U.S. Department of Health and Human Services has threatened to withhold the money if the state does not have a plan up and running by July 1.

U.S. Sen. Edward Kennedy, D-Mass., said he was optimistic the bill would satisfy federal officials and guarantee the state will continue to receive the extra $385 million in annual Medicaid dollars.

"It looks to me that it falls within 95 percent of what they were asking," said Kennedy. "If there was ever a time when we should have understanding from the federal government it is now."

The plan would also establish a health care "connector" which will permit private insurers to provide affordable policies to small businesses and individuals, including low-cost products targeted at young adults.

The plan calls for other health care reforms, such as requiring family plans to cover children up to age 25, as well as increased funding for preventative care.

John McDonough of Health Care for All called the bill "promising."

"If it can be achieved as outlined, it would be an enormous step forward for Massachusetts," he said.

Jim Roosevelt, CEO of Tufts Health Plan, said he couldn't yet say whether the plan would make it possible for insurers to offer the low cost health plans touted as a major part of the legislation.

"Without looking at the details of the bill, I can't tell you whether it's possible," said Roosevelt.

The legislation's major goals include covering 90-95 percent of the uninsured in the next three years, reducing health care costs to businesses and reducing use of the state's free care pool through the expanded insurance coverage.

Lawmakers will only be allowed to vote up and down on the final version when it reaches the floor of each chamber.

Once approved, Romney must decide whether to sign the bill. He can also issue line-item vetoes

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