Individual Tax Credits Will Not Expand Health Coverage for America's Uninsured

Report Released on Eve of Senate Markup of Uninsured Legislation

Washington, DC- On the eve of the Senate Finance Committee's consideration of legislation to expand health coverage for the uninsured, a new report concludes that tax credits for the purchase of individual health insurance - an approach favored by President Bush - will fail to make health coverage affordable for low-wage workers. The report, based on a 25-state survey undertaken by the consumer health organization Families USA, finds that healthy, non-smoking women ages 55 and 25 will be unable to afford health insurance even if they receive a tax credit.

Most tax-credit proposals for the purchase of individual health coverage by low-wage workers, such as the President's proposal, provide annual tax credits approximating $1,000 per year. But, according to the report, the average premiums for a standard health plan in the 25 states for healthy, non-smoking women ages 55 and 25 are $4,734 and $2,395, respectively. Health insurance for unhealthy and/or smoking women would be much higher or would be unavailable, according to the report.

The report comes at a time of renewed national action about the uninsured. Starting on September 10, a diverse group of major national organizations, spanning the ideological spectrum, launched an advertising campaign highlighting the need to expand coverage. On September 12, the Institute of Medicine is scheduled to release a study about the uninsured. The Senate Finance committee plans to meet within two weeks to mark up legislation aimed at decreasing the number of uninsured Americans.

"The costs of individual health insurance are far more expensive than the cash value of pending tax-credit proposals," said Ron Pollack, executive director of Families USA. "They are like a 10-foot rope thrown to a person at the bottom of a 40-foot hole.

"As a result," Pollack said, "low-wage, uninsured workers across America will either find health premiums unaffordable or will only be able to buy Swiss cheese-type policies that have many more holes than cheese."

In its 25-state survey, Families USA examined what, if any, health coverage is available for $1,000 for healthy, non-smoking women ages 55 and 25. The survey also examined the costs for a "standard health plan" (comparable to the Federal Employees Health Benefits Program Blue Cross/Blue Shield Preferred Provider Organization plan) for healthy, non-smoking 55- and 25-year-old women. The key survey findings were as follows:

• For standard health plans, the average premium in the 25 states for a healthy, non-smoking, 55-year-old woman was $4,734.
• In 18 of the 25 states, no $1,000 health plans were available for healthy, non-smoking, 55-year-old women, let alone individuals who smoke or have health problems.
• In the few (seven of 25) states where $1,000 plans for healthy, non-smoking, 55-year-old women were potentially available, the health coverage was porous. Deductibles were enormous ($5,000 for the plans in five of the seven states); co-payments and out-of-pocket limits were very high; doctors' visits were not covered by plans in three of the seven states and were limited in the others; prescription drugs and mental health care were uncovered by plans in six of the seven states; and emergency care was uncovered by plans in three of the seven states and was deficiently covered in the other states.
• Even for a young and healthy woman, the 25-state survey showed that a $1,000 tax credit is far too small. The average premium for a standard health plan for a healthy, non-smoking, 25-year old woman was $2,395. In only one of the 25 states surveyed was a cheap ($1,000, bare-bones) plan available that covered maternity care.

  "The state-by-state data make clear that individual tax-credit proposals are an ineffective way to reach America's uninsured, low-wage workers," said Pollack. "These individual tax-credit proposals compare very unfavorably to expansions of public health programs, such as Medicaid and the State Children's Health Insurance Program (SCHIP)."

  The 25 states surveyed in the Families USA report were: Alaska, Arizona, Arkansas, California, Florida, Illinois, Iowa, Louisiana, Maine, Massachusetts, Mississippi, Montana, New Jersey, New Mexico, New York, North Dakota, Oklahoma, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Utah, Vermont, and West Virginia.

 See pdf of full report

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Families USA is the national organization for health care consumers. It is nonprofit and nonpartisan and advocates for high-quality, affordable health care for all Americans.

1201 New York Avenue NW, Suite 1100 · Washington, DC 20005
202-628-3030 · Email: info@familiesusa.org · www.familiesusa.org