Refundable Tax Credits Would Help the Uninsured
December 4, 2001
People who get their health insurance through their employers are not taxed for that cost. There are proposals in Congress to help those who must buy their own insurance with after-tax dollars by giving them a refundable tax credit (one that is paid regardless of whether the recipient paid that much in taxes).
Two recent studies show that a $1,000 refundable tax credit (for individuals) would substantially lower the numbers of uninsured in the United States.
A study by the National Bureau of Economic Research found that, with the credit:
- As many as 85 percent of the uninsured would buy health insurance with a $1,000 deductible, a 20 percent coinsurance requirement and a $2,000 limit on out-of-pocket spending (see figure).
- More than 25 percent of the uninsured could get the policy without paying anything beyond the tax credit.
- Another 25 percent would have to pay no more than $168 a year beyond the tax credit.
Using different assumptions, researchers found that between 50 percent and 75 percent of the uninsured population could purchase individual coverage for no cost beyond the $1,000 tax credit if they chose from the 10 percent of policies with the lowest available premiums.
Another study, by FamiliesUSA, only considers the insurance a 25- and 55-year-old woman could obtain -- limited to policies similiar to the most generous plan offered federal employees, which is Blue Cross Blue Shield with a $250 deductible and minimal copayments. But even that study found that healthy, non-smoking, 25-year-old women could get coverage for $1,000 in all but six states.
Since 79 percent of the uninsured are under 45 years old, the Families USA study actually supports the conclusion of the NBER study that something approaching 85 percent of the uninsured would be able to purchase coverage with a $1,000 tax credit.
Source: Greg Scandlen (NCPA Senior Fellow in Health Policy), "Tax Relief For The Uninsured: Scholarship vs. Political Hype," Brief Analysis No. 381, December 4, 2001, NCPA.
For Brief Analysis text
For NBER text
For Families USA text
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