Bush unveils plan to expand health coverage

A new Bush administration plan designed to tackle the problem of the uninsured could help expand coverage, reducing provider cost-shifting to employers currently offering health insurance, benefit experts say.

Under the proposal, which President Bush outlined at the Republican National Convention in New York, employers with 100 or fewer employees would be eligible for a refundable tax credit for contributions they make to employees’ health savings accounts. The credit would apply to the first $500 in contributions an employer makes to each employee’s HSA for family coverage, while a maximum tax credit of $200 per worker would be provided for individual coverage.

Low-income individuals not covered by employer plans would be eligible for other tax credits. The credit would be available for both HSA-linked high-deductible health insurance coverage and for more traditional coverage.

In the case of HSA-linked coverage, the government would directly contribute — for family coverage — $1,000 to an individual’s HSA, along with a $2,000 refundable tax credit to partially offset the cost of the premiums for the high-deductible health insurance plan to which the HSA is linked. For individual coverage, the government would make a $300 HSA contribution and provide a $700 tax credit.

For low-income families who opt for a more traditional plan, such as a health maintenance organization, the government would provide a $3,000 health insurance premium tax credit for family coverage and a $1,000 tax credit for individual coverage.

Regardless of whether coverage is obtained through an HSA-linked plan or a more traditional plan, the tax credit would be advance refundable. That means an individual could use the credit immediately to offset the cost of the health insurance premium, rather than claiming the credit when filing income taxes.

Other provisions in the plan, which requires congressional approval, would allow individual health care purchasers to buy coverage from insurers outside their state of residence. That could cut costs for individuals who, for example, buy coverage in a state that imposes few benefit mandates on health insurers.

Additionally, the Bush plan calls for providing states with several billion dollars in grants to set up health insurance purchasing pools through which individuals eligible for health insurance tax credits could purchase coverage.

“HealthPools will use the purchasing power of thousands of individual families to help the reduce the cost of health insurance premiums,” the White House said in fact sheet, noting it envisions states setting up Web sites and toll-free numbers people could use to sign up for coverage. Pool coverage applications also would be available at heavily used government facilities, such as motor vehicle offices.

Finally, the proposal calls for devoting more federal resources to expanding enrollment in such government programs as Medicaid and the State’s Children Health Insurance Program, where millions of eligible beneficiaries have never signed up for coverage.

The administration estimates the entire package would increase the number of people with health insurance by between 11 million and 17.5 million. Currently, around 45 million people lack coverage.

The use of tax credits to expand coverage is not new. A 2002 federal law gives eligible beneficiaries a tax credit equal to 65 percent of the premiums they pay for health insurance. Those eligible for the so-called health coverage tax credit are individuals who have lost their jobs due to foreign competition and retirees age 55 through 64 whose former employers’ pension plans have been taken over by the Pension Benefit Guaranty Corp.

Benefit experts say the small employer HSA-related tax credit could be enough to maintain coverage at those firms on the edge of folding their health insurance plans because of the high cost of premiums, while also pushing those leaning toward offering coverage to do so.

“It helps those on the edge,” said Andy Anderson, a consultant with Hewitt Associates Inc. in Lincolnshire, Ill.

The package’s $3,000 in subsidies — through a combination of direct federal contributions to lower-income individual’s HSAs and tax credits to offset health insurance premiums — would be what Mr. Anderson describes as “huge assistance” to people in the lower middle class who are not covered under employer plans and who earn too much to qualify for Medicaid, but find the cost of private health insurance prohibitive.

“It could make a big difference for them,” said Joe Martingale, national strategy health care leader for Watson Wyatt Worldwide in New York.

While large employers would not be eligible for the health insurance tax breaks, they still would benefit from it, experts say. If more people have health insurance, they say, hospitals would see a reduction in the amount of uncompensated care they provide to the uninsured, reducing their need to shift costs to insured patients, said Joe Walshe, a principal in the HR services unit of PricewaterhouseCoopers L.L.P. in Washington.

“Anything that diminishes the number of uninsured is good news for corporate America,” Mr. Martingale said.