Below we describe the impact of the President’s proposal and the Congressional tax credit proposal on health insurance coverage nationally and by state.
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Impact on the Uninsured
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President’s Proposal. We project that under current policy there will be about 48.8 million people without health insurance in 2009. Under the President’s proposal, about 10.9 million people would become newly covered under the tax deduction, 8.6 million under Affordable Choices, and another 0.8 million children under SCHIP (Figure 12). Note that children would be automatically enrolled into the SCHIP program as their parents enroll in an Affordable Choices plan.
We estimate a net reduction in the uninsured of 18.1 million after taking into account approximately 2.2 million that would be expected to lose coverage when their employer coverage is discontinued as a result of eliminating the tax preference for ESI (see discussion below).
Number of People Affected (in millions) Figure 11: Summary of Changes in Coverage Under the Presidents Proposal in 2009 Number of people who take the tax deduction Total 174.5 Previously uninsured 10.9 Previously Non-group Insurance 9.3 Previously Employer Coverage 154.3 Number of people who enroll in Affordable Choices Health Insurance Program (Affordable Choices) Total 9.7 Previously uninsured 8.6 Previously with employer or non-group insurance 1.1 Workers and dependents whose employer drops coverage Total 12.3 Take non-group coverage 8.5 Enroll in Affordable Choices 0.5 Enroll in Medicaid/SCHIP 1.1 Go uninsured 2.2 Take up Employer coverage Total 1.0 Currently decline ESI who take it 0.7 Firms who start offering coverage 0.3 Reduction in uninsured Total 18.1 Newly covered due to tax deduction 10.9 Newly covered adults due to Affordable Choices 8.6 Children newly covered in Public Program due to Parents
covered in Affordable Choices0.8 Become uninsured from employer dropping coverage (2.2) Source: Lewin Group estimates using the Health Benefits simulation model (HBSM). Congressional Tax Credit proposal. Under the tax credit proposal, about 22.7 million people would become newly covered (Figure 12). We estimate a net reduction in the uninsured of 21.1 million. This takes into account approximately 1.6 million that would be expected to lose coverage when their employer coverage is discontinued as a result of eliminating the tax preference for ESI (see discussion below).
Figure 12: Summary of Changes in Coverage under the S.1019 Proposal in 2009
Number of People Affected (in millions) Figure 12: Summary of Changes in Coverage under the S.1019 Proposal in 2009 Number of People who take the tax credit total 188.8 Previously uninsured 22.7 Previously non-group 10.0 Previously ESI coverage 156.1 Workers and dependents whose employer drops coverage Total 12.6 Take non-group coverage 10.6 Enroll in Medicaid/SCHIP 0.4 Go uninsured 1.6 Take up ESI coverage Total 2.8 Currently decline ESI who take it 2.1 Firms who start offering coverage 0.7 Reduction in uninsured Total 21.1 Newly covered 22.7 Become uninsured from employer dropping coverage (1.6) Source: Lewin Group estimates using the Health Benefits simulation model (HBSM). Figure 13 displays our estimates of the reduction in uninsured by state. The average percent reduction in the number of uninsured is higher under the Congressional tax credit proposal (41 percent reduction) compared to the President’s proposal (35 percent reduction). In fact, in all but one state (Arizona), the reduction in uninsured was greater under the Congressional proposal. In Arizona, there was a rather high take-up of the tax deduction coupled with a relatively low take-up rate of the tax credit (see state specific tables in Appendix). Also of note, North Dakota has the lowest reduction in the number of uninsured under either proposal.
Figure 13. Summary of Proposal Impacts on State Uninsured and Cost Estimates President's Proposal Congressional Tax Credit Proposal State Current Uninsured (in 1,000s) Reduction in Insured (in 1,000s) Net Federal Cost (in $ millions) Net State Cost (in $ millions) Net Total Public Cost (in $ millions) Reduction in Insured (in 1,000s) Net Federal Cost (in $ millions) Net State Cost (in $ millions) Net Total Public Cost (in $ millions) Alabama 696 252 $1,446 $262 $1,709 286 $844 -$440 $404 Alaska 141 34 $84 $12 $97 40 -$42 -$13 -$55 Arizona 909 446 $2,022 $271 $2,293 299 $993 -$461 $531 Arkansas 520 197 $1,097 $168 $1,265 235 $764 -$203 $561 California 7,276 2,341 $12,220 $2,175 $14,394 2,830 $6,799 -$4,946 $1,853 Colorado 880 348 $1,724 $340 $2,065 396 $789 -$561 $228 Connecticut 449 138 $551 $68 $619 173 -$154 -$545 -$699 Delaware 103 28 $152 $28 $180 36 $0 -$110 -$110 Florida 3,596 1,432 $5,774 $52 $5,826 1,723 $3,526 -$190 $3,336 Georgia 1,615 625 $3,189 $422 $3,611 771 $1,758 -$939 $819 Hawaii 118 43 $425 $1 $426 47 $262 -$189 $73 Idaho 280 140 $494 $75 $569 148 $289 -$149 $140 Illinois 1,881 621 $3,451 $622 $4,074 745 $1,115 -$1,489 -$374 Indiana 975 311 $1,675 $292 $1,967 382 $542 -$747 -$205 Iowa 379 120 $1,124 $257 $1,382 144 $531 -$396 $135 Kansas 380 122 $947 $202 $1,148 136 $423 -$274 $149 Kentucky 666 217 $1,237 $218 $1,455 250 $718 -$393 $325 Louisiana 825 336 $1,229 $73 $1,303 387 $787 -$218 $569 Maine 149 27 -$23 $22 -$1 48 -$205 -$225 -$430 Maryland 778 259 $1,838 $306 $2,144 326 $639 -$698 -$59 Massachusetts NA NA NA NA NA NA NA NA NA Michigan 1,224 395 $2,168 $377 $2,546 479 $173 -$1,159 -$985 Minnesota 609 223 $1,849 $517 $2,366 289 $689 -$1,191 -$501 Mississippi 516 186 $1,048 $124 $1,171 219 $771 -$246 $525 Missouri 655 201 $1,881 $276 $2,158 258 $998 -$607 $391 Montana 195 64 $322 $57 $379 72 $196 -$97 $99 Nebraska 258 75 $619 $111 $730 91 $267 -$196 $71 Nevada 464 166 $901 $39 $940 191 $603 -$17 $586 New Hampshire 168 50 $276 $2 $278 67 -$50 -$9 -$59 New Jersey 1,350 634 $1,724 $78 $1,802 736 -$24 -$1,428 -$1,453 New Mexico 300 111 $675 $83 $758 118 $361 -$141 $219 New York 2,483 1,053 $2,950 $488 $3,439 1,236 $315 -$2,333 -$2,018 North Carolina 1,496 541 $3,154 $501 $3,655 654 $2,176 -$822 $1,354 North Dakota 95 17 $229 $50 $278 23 $111 -$57 $54 Ohio 1,646 559 $3,082 $476 $3,557 704 $996 -$1,320 -$324 Oklahoma 696 284 $1,256 $215 $1,471 323 $831 -$345 $486 Figure 13. Summary of Proposal Impacts on State Uninsured and Cost Estimates (cont’d) President's Proposal Congressional Tax Credit Proposal State Current Uninsured (in 1,000s) Reduction in Insured (in 1,000s) Net Federal Cost (in $ millions) Net StateCost (in $ millions) Net Total Public Cost (in $ millions) Reduction in Insured (in 1,000s) Net Federal Cost (in $ millions) Net State Cost (in $ millions) Net Total Public Cost (in $ millions) Oregon 609 303 $744 $126 $871 314 $93 -$445 -$352 Pennsylvania 1,668 599 $2,787 $391 $3,179 683 $831 -$1,315 -$484 Rhode Island 141 41 $125 $41 $166 51 -$52 -$133 -$185 South Carolina 715 242 $1,122 $161 $1,283 292 $694 -$439 $254 South Dakota 117 28 $266 $17 $283 36 $143 -$6 $138 Tennessee 928 312 $1,769 $53 $1,821 370 $897 -$67 $830 Texas 5,511 2,014 $6,523 $344 $6,867 2,308 $4,109 -$227 $3,881 Utah 425 154 $790 $122 $912 186 $395 -$228 $167 Vermont 71 27 $14 $18 $32 33 -$126 -$86 -$212 Virginia 1,086 375 $2,746 $473 $3,219 466 $1,372 -$838 $534 Washington 1,009 492 $1,556 $17 $1,573 557 $521 -$86 $435 West Virginia 321 103 $548 $70 $618 116 $304 -$164 $140 Wisconsin 708 192 $926 $255 $1,181 241 -$399 -$709 -$1,108 Wyoming 93 22 $141 -$11 $130 29 $58 -$26 $32 NA – Estimates are not included for Massachusetts due to the transitioning of their reform plan.
Source: Lewin Group estimates using the Health Benefits simulation model (HBSM).
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Changes in Private Insurance Coverage
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President’s Proposal. Under current law, the tax exclusion for employer-sponsored health benefits effectively reduces the cost of insurance to workers. Creating a tax deduction of an equal amount for both employer and non-group coverage eliminates the relative tax advantage of providing coverage through the employer, resulting in a shift of people away from ESI to private non-group coverage. With the elimination of the relative tax advantage of ESI, some employers are expected to discontinue their coverage, particularly in cases where their workforces can obtain individual coverage for less than what their employer would have to pay in the small group market. This would typically occur among small firms with younger and healthier workers in states where insurers are permitted to provide greater discounts for age and health status in the individual market than are permitted in the small group market.12
Under current-law we projected there would be about 158.1 million workers and dependents with ESI in 2009.13 Using the assumptions discussed above, we estimate that about 12.3 million covered workers and dependents would be in firms that discontinue health insurance benefits. This would be partly offset by approximately 0.3 million people in firms where the employer is stimulated to start to offer coverage.14 Also, we estimate that there are about 0.7 million workers and dependents that have declined the coverage offered to them at work who would now take ESI in cases where the value of the tax deduction is greater than the value of the existing tax exclusion.15 Thus, we estimate a net reduction in ESI enrollment of approximately 11.3 million.
Of the 12.3 million that would lose their ESI, about 2.2 million (18 percent) would become uninsured. We also expect about 0.5 million people who lose ESI coverage to enroll in Affordable Choices and about 1.1 million to be covered under Medicaid. The vast majority would take individual coverage (8.5 million) with the tax deduction.
The number of people with individual coverage nearly triples under the proposal from approximately 10 million to 27.7 million. Along with the 8.5 million who would lose their ESI coverage, an additional 9.3 million would remain in non-group coverage and 9.9 previously uninsured would take-up coverage as the tax deduction makes insurance coverage more affordable.
Congressional Tax Credit Proposal. Similar to the tax deduction described above, creating a tax credit of an equal amount for both employer and non-group coverage and removing the tax exclusion for employer sponsored insurance eliminates the relative tax advantage of providing coverage through the employer, resulting in a shift of people away from ESI to private non-group coverage.
Under the tax credit proposal, we estimate that about 12.6 million covered workers and dependents would be in firms that discontinue health insurance benefits. This would be partly offset by approximately 0.7 million people in firms where the employer is simulated to start to offer coverage.16 Also, we estimate that there are about 2.1 million workers and dependents that have declined the coverage offered to them at work who would now take ESI in cases where the value of the tax credit is greater than the value of the existing tax exclusion. Thus, we estimate a net reduction in ESI enrollment of approximately 9.8 million.
Of the 12.6 million that would lose their ESI, about 1.6 million (13 percent) would become uninsured. We expect about 0.4 million to be covered under Medicaid or SCHIP. The vast majority would take individual coverage (10.6 million).
The increase in the number of people with individual coverage is even greater for the Congressional proposal in comparison to the President’s proposal, as coverage reaches approximately 40.4 million. In this case, along with the 10.6 million who would lose their ESI coverage, an additional 10.0 million would remain in non-group coverage and 19.9 previously uninsured would take-up coverage as the tax credit makes insurance coverage more affordable.
Figure 14 displays the changes in the employer-sponsored and individual insurance markets by State under each proposal.
Figure 14. Changes in the employer-sponsored and individual insurance markets by State under the President’s Proposal and Congressional tax credit proposal. Current Insured Change Under President's Proposal Change Under the Congressional Tax Credit Proposal State ESI Non-Group Total Private ESI Non-Group Net Change Private ESI Non-Group Net Change
PrivateAlabama 2,401 106 2,506 -209 261 52 -187 469 283 Alaska 331 18 350 -29 35 6 -26 65 39 Arizona 2,792 188 2,980 -241 614 373 -221 497 276 Arkansas 1,331 101 1,431 -113 176 63 -97 328 231 California 18,278 1,803 20,081 -1,606 2,126 520 -1,492 4,255 2,763 Colorado 2,623 223 2,847 -231 355 125 -211 603 393 Connecticut 2,130 111 2,241 -180 222 42 -172 342 169 Delaware 483 17 500 -42 49 8 -39 74 35 Florida 8,261 656 8,917 -731 1,368 637 -631 2,332 1,701 Georgia 4,751 226 4,976 -418 671 253 -363 1,123 760 Hawaii 745 30 775 -71 75 5 -70 115 45 Idaho 770 74 844 4 79 83 18 130 148 Illinois 7,315 368 7,683 -640 780 140 -598 1,326 728 Indiana 3,596 223 3,819 -296 368 71 -271 643 372 Iowa 1,738 146 1,884 -152 161 9 -145 286 141 Kansas 1,589 122 1,711 -143 149 6 -136 271 134 Kentucky 2,175 107 2,281 -187 224 37 -172 415 243 Louisiana 2,097 147 2,244 -190 274 84 -159 525 366 Maine 681 33 713 2 16 18 10 38 48 Maryland 3,330 148 3,479 -291 370 79 -271 590 319 Massachusetts NA NA NA NA NA NA NA NA NA Michigan 5,946 239 6,184 -504 602 98 -482 946 464 Minnesota 3,346 243 3,589 -295 395 100 -288 569 281 Mississippi 1,359 87 1,445 -115 163 48 -97 313 216 Missouri 3,222 208 3,430 -279 330 51 -267 518 251 Montana 424 57 481 -45 55 11 -40 112 72 Nebraska 1,041 109 1,150 -91 96 5 -86 175 89 Nevada 1,329 73 1,402 -107 157 50 -97 283 186 New Hampshire 851 36 887 -75 92 17 -72 137 65 New Jersey 5,377 191 5,568 24 370 393 111 625 736 New Mexico 835 46 880 -72 108 35 -68 184 115 New York 10,206 497 10,703 37 560 597 176 1,060 1,236 North Carolina 4,320 326 4,646 -380 533 153 -335 979 643 North Dakota 356 45 400 -35 28 -8 -34 56 22 Ohio 6,693 264 6,957 -557 732 175 -517 1,208 691 Oklahoma 1,704 101 1,805 -153 255 101 -133 453 320 Figure 14. Changes in the employer-sponsored and individual insurance markets by State under the President’s Proposal and Congressional tax credit proposal (cont’d) Current Insured Change Under President's Proposal Change under the Congressional Tax Credit Proposal State ESI Non-Group Total Private ESI Non-Group Net Change Private ESI Non-Group Net Change Private Oregon 1,894 129 2,023 8 176 184 38 276 314 Pennsylvania 6,886 456 7,342 -593 722 129 -554 1,228 674 Rhode Island 617 26 643 -54 65 11 -51 101 50 South Carolina 2,108 131 2,239 -182 244 62 -157 444 287 South Dakota 403 53 456 -37 35 -2 -34 70 35 Tennessee 3,071 224 3,295 -255 325 71 -229 590 361 Texas 10,852 613 11,465 -889 1,493 605 -754 3,024 2,270 Utah 1,466 88 1,554 -129 178 48 -122 303 181 Vermont 344 19 362 1 16 17 4 28 33 Virginia 4,387 253 4,639 -379 489 110 -353 810 457 Washington 3,481 241 3,723 13 274 287 71 487 557 West Virginia 819 39 857 -70 92 22 -61 175 114 Wisconsin 3,332 189 3,521 -286 303 16 -275 508 233 Wyoming 267 25 293 -27 30 3 -25 54 29 NA – Estimates are not included for Massachusetts due to the transitioning of their reform plan.
Source: Lewin Group estimates using the Health Benefits simulation model (HBSM).
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