Subsidies Targeted At Low-Income Workers Most ‘Efficient’ Way to Reduce Uninsured, Urban Institute Report Finds

A new Urban Institute study of subsidies and tax credits found that targeting such assistance to low-income workers, rather than low-wage workers or employers, is a more "efficient" way to reduce the number of uninsured. Researchers surveyed literature on the working uninsured and examined data from 1999 Current Population Survey to "paint a more detailed portrait" of this group and develop policy recommendations based on these findings. Consistent with previous research, the study found that employees in small firms and those who work in the service sector are more likely to lack health insurance, as are "[w]orkers who earn low wages, work part-time, have short job tenure and who live in households with low incomes." In addition, 59% of uninsured workers are employed at jobs that do not sponsor coverage; 21% are not eligible for their employer-sponsored coverage; and 20% turn down coverage from their employer.

Policy Recommendations
Based on these findings, the report concludes that "targeting subsidy dollars to low-income workers" -- those whose total household income is low -- "would be the most efficient policy, since they are the most likely to be uninsured." The researchers defined "effective policy" as "one that would reach many uninsured workers," and "efficient policy" as "one that would extend eligibility to more uninsured than to the already insured." Although targeting low-wage workers -- those with a low salary -- would be the most "effective" option, many low-wage workers are already insured through their spouses. The report presents the following five specific policy implications based on these conclusions:

• While employer tax credits may be "easier to administer," they are "less efficient" since "so many firms already offer" coverage.
• Subsidies must be large enough to give low- and moderate-income workers incentive to purchase insurance.
• Workers should be allowed to use subsidies for either employer-sponsored or private coverage.
• Tax credits "must be refundable and prospective" to help low-income workers (Garrett et al., "Workers Without Health Insurance: Who Are They and How Can Policy Reach Them?," Aug. 2000).