Tax credit plan would offer funds for health insurance

The bill would help cover the uninsured but would bypass state-mandated patient protections.

By Joel B. Finkelstein, amednews staff. March 3, 2003.

Washington -- What's old is new again. The first tax credit proposal of the season revisits old territory with new promises to help the uninsured.

The bill, called the Fair Care for the Uninsured Act of 2003, would offer tax credits for families who cannot get health insurance, either through employer or public programs. The credits would be advanceable, so people could get them before tax time, and refundable, for people who don't pay enough tax to cover the entire credit.

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But, critics say, users of the tax credit may find themselves buying coverage that is next to worthless.

Many Americans either cannot afford or don't have access to health insurance, said Rep. Mark Kennedy (R, Minn.), who introduced the bill last month. "This bill aims to help solve that problem by giving cash-strapped Americans a refundable tax credit to purchase insurance."

The measure, which is identical to bills introduced in the past two sessions of Congress, would change the tax code to make available as much as $1,000 for individuals and $3,000 for families to buy health insurance. The bill also encourages states to form high-risk pools and associations to form cafeteria plans through which people could buy coverage.

The consumer group U.S. Freedom Foundation came out in support of the legislation. "This bill won't eliminate all our 40 million uninsured, but neither can any other single proposal that can pass a closely divided Congress," said the foundation's president, John E. Stone.

The AMA supports tax credits, with the caveat that they should be generous enough to cover the entire cost of health insurance for the lowest-income Americans and be graduated based on income.

Several analyses have suggested that while $1,000 may cover the cost of insuring someone who is healthy, even minor chronic ailments can put premiums well out of that range.

Relying on risk pools

Stone said that the need to cover patients with chronic illnesses, sometimes called uninsurables, is the reason behind state-run high-risk pools.

Such insurance pools already exist in about half of the states to guarantee coverage to the uninsurables. But most still need to charge premiums that are well above the market to stay in business.

The bill calls on states to form these high-risk pools but does not provide any financial incentives, said Mila Kofman of Georgetown University's Public Policy Institute.

"It's just not going to happen in this economy," she said of the chances of states voluntarily starting high-risk pools if they have not already done so.

Despite charging enrollees high premiums, these pools are still money-losing operations for states.

The bill also calls for the creation of individual membership associations -- group health plans run by nonprofit associations. The health plans would be regulated by the Employee Retirement Income Security Act, exempting them from state laws and mandates.

Proponents argue that this would allow the associations to offer more affordable insurance because they wouldn't have to conform to onerous and expensive state requirements.

Opponents say that those requirements are important, well-established measures designed to protect patients from paying for health insurance that won't cover them when they need it.

ADDITIONAL INFORMATION:

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Thomas, the federal legislative information service, for bill summary, status and full text of the Fair Care for the Uninsured Act of 2003 (HR 583) (http://thomas.loc.gov/)

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