HSAs AND THE UNINSURED
January 3, 2006
The Bush administration is considering a proposal to that would boost Health Savings Accounts (HSAs). It would give a refundable tax credit to those under age 65 to purchase health insurance plans with HSAs. According to the University of Minnesota, the plan would reduce the number of uninsured in America.
Author Roger Feldman and his colleagues examined the effect of three simulations: a refundable tax credit of up to 90 percent of insurance premiums, a 75 percent HSA subsidy for low-income individuals, and a full subsidy for those unemployed, regardless of income. The results:
- Bush's tax credit proposal would reduce the number of uninsured by 10.7 percent at a cost of about $8.1 billion; it would also increase the number of people who turn down employer-sponsored insurance, but would only affect 1 percent of the employer-offered market.
- The buy-in subsidy would reduce the number of uninsured by 16.5 percent, at a cost of about $10.8 billion for those who are uninsured, and $1.4 billion for those who turn down employer-sponsored health insurance.
- A full subsidy would reduce number of uninsured by 47 percent, however, it would cost an estimated $52.3 billion for those previously uninsured, and $16.9 billion for those who turn down employer-sponsored health insurance.
- A full subsidy for the unemployed would prevent the erosion of the employer-sponsored health insurance market and would reduce the number of uninsured even more than the Bush administration's proposal, but it would cost more -- about $11.2 billion.
In conclusion, the Bush administration's tax credit proposal would double individual HSA take-up and reduce the number of uninsured by about 2.9 million people, at a cost of about $8.1 billion annually.
Source: Roger Feldman, et al., "Health Savings Accounts: Early Estimates of National Take-Up," Health Affairs, November/December 2005.
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