Uninsured individuals and families need health care coverage. A key factor keeping them from getting coverage is its cost. Some policymakers suggest opening government controlled public programs, such as Medicaid and SCHIP, to the uninsured. These programs, however, inevitably lead to limited access and reduced quality of care.

A better solution would be to provide individuals and families with direct financial incentives to help them secure and maintain private coverage. A health care tax credit, which is both refundable and advanceable, would make health care coverage more affordable and accessible for those in need.

The Obstacles Facing the Uninsured

The existing tax treatment of health insurance is an inefficient system for individuals to obtain health care coverage. Today, individuals receive a tremendous tax break for participating in coverage only when offered through their employer. This linkage between employment and coverage has created a scenario that fuels the problems facing the uninsured.

Consider the following complications facing the uninsured:

Work Status: Surprisingly, the majority of the uninsured are part of working households, where at least one person has a job. In many instances, these employees either are not offered coverage through their employer, do not qualify for employer coverage, or simply cannot afford their share of the policy. Without the tax break offered to employer-sponsored coverage, these workers must use after-tax dollars to buy a policy.

Income Status: The majority of uninsured are lower income workers who tend to have less access to employer-sponsored coverage. Therefore, spending after tax dollars on health insurance can be prohibitive. With a rising number of the uninsured among the middle class, they too face the penalty of purchasing a health insurance policy with after tax dollars.

Age Status: The majority of uninsured are young, between the ages of 18 and 34. Being new to the workforce, their incomes tend to be lower than their older counterparts. Therefore, for those young (and healthy) workers without access to employer-sponsored coverage and without the tax incentive to buy coverage associated with it, many individuals choose to go without coverage.

How Tax Credits Help To Overcome These Obstacles

A refundable, advanceable tax credit would provide individuals and families a direct subsidy to help them purchase health care coverage, and would begin to bring equity to the tax treatment of health insurance for individuals. 

Work Status: Under a tax credit approach, individuals would no longer be bound to their employer for their health insurance. This means that regardless of if their employer offers coverage or not, and regardless of if they have a job or not, individuals would be able to maintain continuous health care coverage.

Income Status: Under a tax credit approach, lower income individuals and families who find it difficult to afford coverage would get the help they need. Tax credits provide direct financial assistance to help individuals and families secure and maintain health care coverage of choice.

Age Status: Under a tax credit approach, younger individuals, who are more likely not to have coverage as well as to have lower incomes, would have the tax incentive to buy coverage. And, under most estimates, would receive enough assistance to cover the entire cost of a policy. As for their older counterparts, a tax credit would help make coverage more affordable.

Conclusion

The uninsured are a dynamic and diverse population. Policymakers should take this into account when developing and considering solutions. Cost remains a major obstacle for these individuals to obtain coverage. Therefore, by providing a tax credit, uninsured individuals and families would get the needed financial assistance to help them buy coverage of their choice.