Policy Brief Examines Linking Tax Credits to Purchasing Pools
As Congress considers various proposals to use tax credits to help low-income people purchase health insurance, a policy brief by the Center for Studying Health System Change states that those proposals must address the issue of risk, suggesting that linking tax credits to purchasing pools would be one option. Under that option, people who received a tax credit would be grouped together under a single risk pool, thereby spreading the risk and (theoretically) reducing premiums, similar to the way large employers insure their employees. Without a purchasing pool, a person who receives a tax credit might have a difficult time purchasing insurance, the brief notes, adding that in the individual market, consumers have fewer insurers to choose from and have less bargaining power. Pooling risks, however, allows all pool members to pay the same premium for a given plan, regardless of their individual risk. In addition, the brief says that using community-rated pools would ensure that people with chronic illnesses could obtain and afford insurance. Pools also would coordinate enrollment, negotiate with insurers to develop plan choices and develop materials that allow consumers to compare plans, tasks that a benefit manager would carry out for a large employer. Using purchasing pools also would "greatly enhance" health plans' participation because of the pools' potential market share.
However, linking tax credits to purchasing pools does raise a number of "difficult policy issues," the brief says. For instance, policy makers must consider how pools are selected, administration fee levels, who determines eligibility and who handles grievances. Furthermore, the brief suggests that legislators mandate participation in purchasing pools for people receiving tax credits because voluntary purchasing pools have not proven to either expand coverage or reduce premium costs. Policy makers also would have to limit the number of purchasing pools within each state and consider how purchasing pools linked to tax credits might affect states' individual and small group markets. The brief concludes, "Whatever path is chosen, if a tax credit policy is going to ensure that people who have the greatest difficulty obtaining coverage, such as the chronically ill, can afford coverage, then policy makers must address the fundamental issue of risk selection" (Trude/Ginsburg, "Tax Credits and Purchasing Pools: Will This Marriage Work?" April 2001).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.