TAX CREDITS FOR THE UNINSURED DON'T WORK UNLESS YOU HAVE INSURANCE MARKET REFORMS: CREDITS HELP THE YOUNG, DO LITTLE FOR OLDER WORKERS -- HON. FORTNEY PETE STARK (Extensions of Remarks - March 08, 2000)

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HON. FORTNEY PETE STARK OF CALIFORNIA IN THE HOUSE OF REPRESENTATIVES Wednesday, March 8, 2000

Mr. STARK. Mr. Speaker, a lot of Members are talking about refundable and non-refundable tax credits to help the uninsured.

Their bills don't work, unless they accompany the proposals with insurance reforms and make the tax credit adequate to help the uninsured who are, overwhelmingly, the nation's poor and near-poor.

On January 27th, a number of Members announced their intention to introduce a bill to provide a refundable tax credit of $1,000 per individual and $2,000 per couple for use in the purchase of health insurance. It does not appear their bills will include insurance reform.

As the attached tables show, that would be nice for a 25 year old individual or couple without children, and might help some 35 year olds, but after that, these tax credits mean less and less for people who are uninsured and middle aged.

The credits would also have a tremendously different impact depending on where one lived. In the Los Angeles market, they would cover most of the cost of a younger person, but a much smaller percentage in Northern Virginia.

The reason most people are uninsured is that they are low-income, working poor, who have to choose between keeping the car running so they can get to work, versus health insurance which they might need, but God willing, won't absolutely need. Unless the subsidy for the insurance is very high, individuals facing the need for food, fuel, and clothes for themselves and their kids will not buy health insurance. That's why these tax credit schemes will not work unless we cover almost all of the cost of a decent policy in an area.

Second, the use of health insurance rises as one ages. That's why insurance for older workers is, of course, more costly. If the credit doesn't keep pace with that fact, or unless we move to community rated insurance reforms, the credits will not help people when they are most likely to need help.

The Jeffords-Breaux proposal fails to do that, except for the very youngest in the very safest types of jobs. WHAT DOES PRIVATE HEALTH INSURANCE COST?

I asked my staff to conduct a brief study using health insurance quotes from the Internet. The results prove why tax credits without insurance reform are a waste of time. I urge Members interested in the tax credit approach to consider the types of reforms included in H.R. 2185.

INTERNET SAMPLING OF HEALTH INSURANCE POLICY
On average the American family is estimated to pay $5,700 for health insurance premiums, a large share of the income that is needed to maintain the family household. In general, a tax credit of only $2,000 will not be able to cover the costs that a poor family will need to provide affordable health care insurance. The survey conducted shows that both of the tax credits, one for individuals and one for families, falls short of eliminating the need for guaranteed health coverage for the poor.
In more than 90% of the survey, we found that the tax credits would still leave each near poor individual or family with a large balance left to pay. In Fairfax County a 25 year old couple with 2 children after a $2,000 credit is still left with a $1,400 bill to pay, while in Alachua County (Gainesville) Florida the bill is almost $2,000. Even in rural Colfax, Nebraska within the same age bracket, there is still a balance that needs to be met. Couples without children face the same problem in that the range of balances run from full coverage for a 25 year old Nebraska couple to an almost $500 balance for the same 25 year old couple in Alachua County, Florida. For a single, 25 year old male living in either Rural Nebraska or Fairfax, Virginia, the $1,000 credit will cover his health coverage in full. However, for men over the age of 35 and women of all ages (in all four counties examined in this survey) the individual tax credit leaves a range of balances from $32 (25 year old female in California) to $3,570 (60 year old female in Florida).
As you get older, the price of health coverage steadily increases. For example in Los Angeles, Calif. the yearly premium rates that have been quoted for a 35 year old single man have nearly doubled once the individual has reached the age of 60 ($1,284 versus $2,184 per year). In the three remaining counties, yearly rates have tripled on average from $1,300 to $3,700 from age 35 to 60, respectively.
In only six out of 120 scenarios mapped out (30 quotes for each state) did this proposed tax credit eliminate the burden of health costs. That means only 5% of the time did the tax credit insure a poor individual or family. Given this data, then these proposed tax credits will only guarantee help to 2.2 million of the 44 million uninsured Americans, not the 21.9 million that is being estimated by the drafters of this bill.
This survey was conducted using an Internet access program called Quotesmith.com. Quotesmith generated quotes for health insurance rates based upon the type of individual or family entered. This survey looked at how much standard health coverage would cost for individuals, couples, couples with children, and retired persons around the country. The criterion for the health insurance premium was a $250+nearest deductible and any policy that pays 80% or more after the deductible has been met. Note these are quotes off the Internet. They are not actual purchases of policies, and do not reflect any increases in rates caused by medical underwriting. In many cases we can expect that the final quote will be higher.
Premiums were studied for individuals who lived in Fairfax County, Virginia; Alachua County, Florida; Los Angeles County, California; and rural Colfax County, Nebraska.
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The occupations were that of a pilot, architect and retired person, while the ages of the individuals ranged from 25 to 60 years of age.
As stated earlier a $1000 tax credit for an older individual is simply not enough. There is no way that such a working poor individual can come close to affording private, individual health insurance, without having to decide whether to forgo basic needs.
The $2,000 tax credit that this bill is proposing for families is even more unrealistic. In not one instance does this credit eliminate the problem of cost. The lowest rate for a family with two children is $205 per month, while the tax credit offers only $167 per month leaving a gap of about $38 per month.
What also becomes very apparent is the fact that as one gets older the premium rates are rising. Therefore, a single 25 year old male can expect to spend about $100 a month on health insurance, whereas a 60 year old man can expect to pay about $250 a month or $3000 a year for his insurance! Once again how can a tax credit of only $1000 provide any relief for the near poor?

MEDICAL INSURANCE RATES
The following medical insurance rates are based upon: $250 plus nearest deductible. After deductible, policy pays 80% or better.
The lowest rates available:

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