Raising Women’s Voices

Health care subsidies for individuals, rather than businesses, is more effective way to cover the low-income uninsured

Posted in Uncategorized by raisingwomensvoices on October 28, 2008

The daily newsletter, CQ Healthbeat, reported last week on a new study released by the Urban Institute claiming subsidies targeted for insuring low-income individuals, rather than encouraging small businesses employers to purchase insurance, is a more effective strategy of covering those most vulnerable in the health care system.

While bipartisan legislation in the Senate has favored subsidizing small business employers’ provision of insurance, employer-based coverage through small businesses is less efficient and more costly than through larger employers.  Small businesses also typically have a lower-wage working force, making it difficult for many workers to purchase employer-based insurance even when offered.

Considering small businesses have a combination of high- and low-wage workers, the study says that targeting low-income individuals for coverage subsidies would better focus resources on those with the greatest need.

So how do the presidential candidates’ health care proposals size up by this logic?

While McCain’s plan does focus on individual- and family-based refundable tax credits ($2,500 and $5,000, respectively) and has no mention of employer subsidies, this proves problematic in that the subsidies are not relative to income and are therefore inefficient at targeting populations at higher risk of uninsurance.  And while the study released by the Urban Insitute finds that subsidies targeted to the individual are most efficient, there remains the policy concern of undermining the employer-based insurance system, which provides the best option for many people under the current system.

Meanwhile, Obama’s plan is thought to work better with the findings of this study because of its emphasis on income-related subidies to individuals.  For political reasons the plan also includes refundable tax credits to small business employers offering coverage, which Urban Institute policy analysts are wary of because of the inefficiency of small businesses in providing coverage.

See the full article, titled “Report: Subsidies for Low-Income Individuals Better Way to Cover Uninsured,” here.


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