Finding Common Ground for Expanded Health Coverage to the Uninsured
Health Insurance Association of America, Families USA and AHA Proposal
Introduction: Almost 43 million Americans are without health insurance today, approximately one out of every six people in the United States. With the number of Americans who lack health insurance at this epidemic level, expanding coverage deserves to be at the top of the policymaking agenda.
As organizations representing the breadth of the health care community, we stand together to forge common ground to end the gridlock over extending health care coverage to the uninsured millions living in America today. As a nation faced with unprecedented prosperity, we have a duty to marshal our resources to help uninsured working Americans. The time is right to press the new Congress and Administration to enact significant health coverage expansion to close the gap of the uninsured. The following proposal is the first step to build consensus around expanding coverage. This proposal will serve as the basis for common ground and coalesced action as the debate on the uninsured begins.
The Assumptions: In the formulation of this agreement, five assumptions served as guidelines:
- Providing health coverage for everyone will occur neither through modest increments nor through one comprehensive package. Instead, progress will be made step by step. We are convinced that the first of these steps must achieve significant expansion of coverage.
- The proposal cannot take away, or appear to take away, health coverage from people who have it today. Any proposal that changes the form of people's health coverage, or that appears to diminish the scope and quality of that coverage, or that threatens to result in increased costs for that coverage, is likely to result in unbeatable opposition.
- As a corollary of the second guideline, the proposal should build on the health coverage structures that work for many millions of insured people. Using existing structures, public and private, will allow for quicker and more effective implementation, and it will avoid the creation of new bureaucracies and further fragmentation of the health system. Additionally, building on systems that currently work has a much better chance of gaining support from the public, policymakers, and interest groups. In the private sector, this means building on employment-based health coverage; in the public sector, this means building on Medicaid and the State Children's Health Insurance Program (S-CHIP).
- The proposal should use public resources in a way that maximizes new health coverage. Since there are many competing demands for government resources - including other significant health care matters - a first-step proposal should make the best use of available resources to maximize coverage of the uninsured.
- The proposal should focus on low-wage workers, their families, and other low-income populations that are least capable of obtaining health coverage on their own. Focusing the search for common ground on low-wage workers and other low-income populations not only makes good policy sense, it makes political sense as well. Even though this group has relatively little political clout, we believe it will be easier to first achieve a consensus on behalf of this group than other segments of the uninsured.
The Proposal: The proposal is designed as a policy framework, not as a set of legislative specifications. Two reasons prompted this. First, it articulates a clear vision for action. And, second, the framework approach allows for the involvement of additional stakeholders as legislation is developed.
The policy framework focuses on the low-wage working population with incomes below 200 percent of the federal poverty level - over half of America's uninsured. The proposal has three parts.
First, the proposal would require an expansion of Medicaid for all people under 65 years of age with annual incomes below 133 percent of the federal poverty level (approximately $18,820 for a family of three). Eligibility for such coverage would be based exclusively on income, no longer on membership in one of several prescribed categories (such as children or parents). To ensure that states have the financial resources to implement this expansion, enhanced federal matching funds would be provided significantly above the current Medicaid funding formula. To the extent that funds are limited, this part of our proposal would be phased in first.
Second, the proposal gives states the option of establishing Medicaid or S-CHIP-type coverage for non-aged adults with incomes between 133 and 200 percent of the federal poverty level. For states that choose this option, coverage would be based on income, not parental status. Like the Medicaid proposal for lower-income people, significantly enhanced federal matching funds would be made available. The two public program expansions would be developed to ensure optimal enrollment of those newly eligible for coverage - using, for example, mail-in application processes; fiscal carrots for states to meet enrollment targets; "presumptive eligibility" systems to enable social services agencies to temporarily enroll eligible people; out-stationing of state certification officials; one-year certification periods; and elimination of resource eligibility standards.
Third, the proposal establishes a non-refundable tax credit for businesses to encourage them to make employment-based coverage more affordable for their low-income workers. This tax credit should be established in tandem with the implementation of public program expansions for people with incomes between 133 and 200 percent of the federal poverty level. The credit would be available to those employers who pay a larger share of the premium (than what is offered to other workers in the company) for those workers whose family incomes fall between 133 and 200 percent of the federal poverty level. For example, if a business currently pays 70 percent of the premiums for all workers in the company and decides to pay all or part of the remaining premium for its low-income workers, that business would receive a tax credit for that additional amount. The employer tax credit would be available only to companies that make contributions to their health plans commensurate with the contribution levels of other similarly situated employers. To ensure that this facet of our proposal strengthens existing coverage, the legislation would seek to secure, and not weaken, current employer coverage and contributions that workers receive through their jobs.
Why the Focus on Low-Wage Workers: Although more than 9 out of 10 privately insured Americans receive health coverage at the workplace, low-wage workers have more difficulty obtaining such coverage. Only 43 percent of those earning $7 an hour or less are offered employment-based coverage, compared to 93 percent of U.S. workers who earn more than $15 an hour. Even when coverage is offered, it is too expensive for many low-wage workers to purchase - both because low-wage workers have less discretionary income to spend on insurance premiums and because premiums, on average, are considerably more expensive for workers in low-wage firms than they are for workers in high-wage firms.
Similarly, public sector coverage for low-wage families (i.e., Medicaid and S-CHIP) leaves many uninsured. In effect, these programs divide low-income populations into three groups - children, the parents of children, and childless adults - and treat these groups very differently. This categorization and differential treatment of low-income populations is an unfortunate vestige of the 16th century Elizabethan Poor Laws that formed the basis of our nation's welfare and Medicaid programs.
Children in most states are eligible for public sector coverage if they live in families with incomes below 200 percent of the federal poverty level ($28,300 in annual income for a family of three). Parents receive considerably less protection: in almost two-thirds (32) of the states, a parent working at the minimum wage ($5.15 per hour) is considered to have "too much income" to qualify for Medicaid if that parent works full time. As a result, parents leaving welfare for work often lose their Medicaid coverage even though they usually wind up in entry-level jobs that provide no health coverage. Single adults or childless couples, no matter how poor, are excluded from Medicaid coverage in the vast majority of states, unless they are disabled. As a result, there are many millions of low-wage working people and families who have no access to employment-based health coverage - or can't afford such coverage - who remain ineligible for Medicaid.
The Rationale: The proposal represents the beginnings of consensus. It would extend health coverage to a very significant portion of people who are uninsured today. It achieves a reasonable balance between public sector and private sector approaches. It focuses priority attention to the people most in need of assistance. It builds on systems that work today and, therefore, does not create new bureaucracies or cause further fragmentation of our health care system. It is designed to eliminate work disincentives by providing new health coverage opportunities to support low-income workers and people moving from welfare to jobs.
Undoubtedly, this proposal - like any that would result in a major increase in health coverage for lower-income families - will require a significant public investment. It is expected that such an approach will be expensive. But - with the economy in good condition, the federal budget in surplus, and state budgets in good shape as well - there never has been a better time to make such an investment.
This proposal, and the broad coalition-building effort to which we are committed, constitutes a viable first step to expand health coverage for many millions of uninsured Americans. Through a common effort, we have a real chance to proceed down the road toward health coverage for all Americans.