Tax Credits Would More Effectively Help Younger People Purchase Health Coverage, Study Says

Tax credits for the purchase of health insurance would "be effective" for young, healthy people but would "do little to ease the financial burden" for people ages 55 and older -- the age group "most likely to rely on individual health insurance policies" -- according to a new study published online in Health Affairs (Health Affairs release, 4/17). In the study, researchers led by Jon Gabel, vice president of health system studies at the Health Research and Educational Trust, found that individual health insurance plans cost more and offer fewer benefits than employer-based plans. The researchers compared information about employer-based and individual health plans from two national surveys of employer-based health plans -- the 1997 Robert Wood Johnson Foundation Employer Health Insurance Survey and the 2000 Kaiser Family Foundation/HRET annual survey of employers -- and information on individual health insurance plans in 10 states from Web sites such as eHealthInsurance.com and QuoteSmith.com. Among the study's findings:

• Annual deductibles for individual health plans averaged between $1,550 and $2,235, compared with $138 and $354 for employer-based plans.
• Eleven percent of individual health insurance plans offered catastrophic coverage when out-of-pocket costs exceeded $2,000, compared with 56% for employer based health plans.
• Individual health insurance plans covered about 63% of medical costs, compared with 75% for employer-based health plans.
• Individual health insurance plans covered inpatient mental health services for 63% of members and outpatient services for 48%, while employer-based plans covered inpatient and outpatient services for almost 100% of members. The study also found that individual health insurance plans offered prescription drug coverage for 80% of members, compared with 97% for employer-based plans.

55 and Older
The study found that the $1,000 individual tax credit such as the one proposed earlier this year by the Bush administration would cover less than 50% of annual premium costs for most individual health insurance policies available to healthy 55-year-old males. Twenty-five percent of those men can get coverage that costs less than $2,184 per year; in comparison, 25% of plans available to healthy 27-year-old males cost less than $816 per year. Gabel said, "Tax credits alone will not help those who need the most help purchasing health insurance" (Health Affairs, 4/17). The study, as well as responses from Donald Young, president of the Health Insurance Association of America; Thomas Wildsmith, an HIAA policy research actuary; and Thomas Hefty, chair, president and CEO of Cobalt Corporation, Wisconsin's Blue Cross Blue Shield, is available online.