| HEALTH CARE TAX
CREDITS – A REAL SOLUTION FOR THE UNINSURED
Of the solutions outlined as a way to help
America’s uninsured, health care tax credits have gained
increasing prominence among economic and political leaders.
With politicians in both parties having introduced health
care tax credit bills in in the 110th Congress, the following provides
some information on this exciting option, and also explains
why health care tax credits can have a meaningful impact on
the nation’s uninsured.
Tax Credit Questions and Answers
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What is a health care tax credit?
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Health care tax credits allow people to keep some of
their income rather than pay it in taxes, if they use
that money to finance a portion of the insurance premiums.
The credits allow those who would otherwise be unable
to afford the full share of their health insurance premiums
to purchase health insurance. |
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What are the characteristics of
an effective health care tax credit?
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The credit is advanceable – eligible individuals
will receive their credit every month, rather than in
a lump sum at the end of the year – to allow them
to buy coverage without incurring undue costs during the
year. |
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The credit is also refundable – individuals who
are subject to payroll taxes only and do not pay income
tax are eligible to receive the credit as a refund from
the Internal Revenue Service. |
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Where can individuals buy insurance
using their credit?
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Depending upon how Congress structures the benefit,
it could be used to purchase coverage through the individual
or group market, to “buy in” to state purchasing
arrangements, or to join an insurance pool in the private
sector or one established by a state for high-risk patients. |
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Could individuals afford to purchase
quality health coverage with a tax credit?
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Absolutely. An advanceable, refundable tax credit for
qualified health insurance would enable workers of low
and modest incomes to purchase Major Medical coverage. |
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For individuals, a $1,000 tax credit could reduce the
average plan cost ($1,772 for individual coverage nationwide)
by more than half. An individual making under $15,000
per year would pay less than $70 per month for health
insurance by utilizing the credit. |
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Why are health
care tax credits more effective than other means of helping
the uninsured?
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Only health care tax credits allow individuals to purchase
insurance policies they own and control. Just as important,
the individual maintains choice – of insurance carriers
from which to purchase coverage, of doctors, and of services
he/she wants covered. Unlike some government-run health
programs, tax credits do not impose a one-size-fits-all
standard, but instead seek to enable and empower individuals
to choose the policies and features that most appeal to
them. |
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Health care tax credits are a more cost-effective method
of insuring workers who are able to pay some (but not
all) of the cost of their health insurance. While most
tax credit proposals in Congress would provide a maximum
individual subsidy of $1,000, the cost of insuring an
individual through Medicaid is roughly twice that amount
(Source: Kaiser Commission on Medicaid and the Uninsured,
January 2005). At a time of limited financial resources
for the federal government, tax credits can provide quality
coverage to low- and middle-income families at a more
modest cost. |
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| Groups of the uninsured
for whom tax credits would be helpful: |
| Working
Americans |
| Small
Businesses |
| Self-Employed |
RESOURCES:
Using
Tax Credits And State High-Risk Pools To Expand Health Insurance
Coverage
By: Bruce Abbe
ABSTRACT: There are practical proposals
now on the public policy table to reduce the number of Americans
without health coverage. While they won’t make health
care free or eliminate the forty million uninsured persons,
they would help millions of Americans acquire or improve their
health insurance. Practical strategies can also be taken to
address access issues for unhealthy persons in the nongroup
market through federal assistance to states to establish and
improve state high-risk health insurance pools, as well as
to make health insurance more affordable for low-income Americans.
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