‘Flexible Benefits’ Tax Credit Plan Proposed
While lawmakers have expressed interest in using tax credits to help Americans purchase health insurance, Lynn Etheredge, senior consultant for George Washington University's Health Insurance Reform Project, proposes in a Health Affairs Web exclusive that a broader, "flexible benefits" tax credit "could offer many more benefits for middle-class, working families" (Health Affairs release, 3/22). Under Etheredge's proposal, "low- to moderate-income workers" would receive a tax credit that they could use to purchase health insurance for themselves or their children, or they could use it for retirement savings, higher education, first home ownership or "catastrophic" medical expenses. The plan would require recipients to enroll their children in Medicaid or CHIP or purchase private insurance. In addition, the proposal would force those lacking health coverage to use the tax credits to purchase coverage through "automatic enrollment" with their employers. However, if employees failed to purchase health insurance, the tax credit would "transfer ... to state government for safety net coverage." Employees who have health insurance for themselves and their children could use the tax credit "at their discretion." The plan, based on a $1,000 tax credit for the "lowest-income one-third of workers" and a 50% benefit to the "next highest-income one-third," would cost $70 billion per year, with 35% to 40% going toward "basic health insurance" for 32,000 uninsured Americans. According to Etheredge, the proposal would "make basic health insurance available to workers" and provide a "financial future with real retirement security" by establishing the "broadest extension" of health benefits and economic security "since the enactment of Social Security and Medicare" (Etheredge, HealthAffairs.org, 3/22). In addition, he points out that flexible benefits tax credits would likely "command" broader "political attention and support than a single-purpose health insurance credit," which could become "bur[ied] under a "mountain of competing issues" (Health Affairs release, 3/22). To view the article, "A Flexible Benefits Tax Credit for Health Insurance and More," go to
http://www.healthaffairs.org/2003Etheredge.pdf. Note: You will need Adobe Acrobat Reader to view the article.