Health Insurance Tax Credits Could Shortchange Women

New York City, December 18, 2002—Federal policy proposals to assist uninsured low-income adults have looked to tax credits to help buy health coverage in the individual insurance market. But a new study by The Commonwealth Fund finds that tax credits within the range of those contemplated in recent proposals would not be high enough to make health insurance affordable to women with low incomes. Based on an analysis of the plans offered in 25 cities, the study finds that tax credits of $1,000 or $1,500 per person would leave even healthy young women with a choice of plans with deductibles that would be high relative to their incomes. In some markets, no plans were available at these premium rates even for 25-year-old women. Older women would fare even worse: in most cities no plan was offered with premiums in this range. The study finds that tax credits would buy less coverage for young women than they would for young men in many markets. This is despite the fact that policies offered on the individual market typically excluded maternity benefits. Moreover, in four of the 25 cities studied, no individual policies were offered with premiums in the $1,000 or $1,500 range for healthy women age 35. "Health insurance is particularly important for women because they have a greater need for health care than men over their lifespan, due in part to pregnancy and childbirth earlier in life, and higher rates of chronic illness later in life," said Karen Davis, president of The Commonwealth Fund. "But policies available to women in the individual market typically don't include maternity coverage, putting low-income working women and families at risk for high health care costs. Tax credit proposals that rely on the individual insurance market simply don't pass the reality test." In Health Insurance Tax Credits: Will They Work for Women? authors Sara R. Collins, Stephanie B. Berkson, and Deirdre A. Downey report on findings from their analysis of premium and benefit quotes for health insurance plans in 25 cities obtained from an Internet website. The study finds that plans offered to healthy women for a $1,000 premium have median deductibles ranging from $1,500 to $7,500. Deductibles in this range would mean that even young, healthy women ages 25 or 35 could face deductibles that would comprise as much as a third of their income, if their incomes were within the range eligible for full tax credits ($15,000 or less). Women would likely face still higher out-of-pocket costs due to excluded benefits. Most plans in the study either exclude maternity coverage, charge additional premiums for maternity benefits, or impose waiting periods. Older women would fare even worse: in the few cities where individual plans are available, a low-income woman age 50 could spend more than half of her annual income on deductibles for plans with premiums at or below $1,000. More comprehensive plans were available in all 25 markets but at much higher premiums. If women tried to buy plans with lower deductibles—deductibles typical of those in plans covering members of Congress or people with employer-sponsored health insurance—women would face premiums that were on average double the amount of a $1,000 tax credit. The authors note that the premium quotes and benefits analyzed in the study were those available for healthy, non-smoking women and men. "Just one of four uninsured women rates her health as excellent," said Sara Collins, senior program officer at the Fund and lead author of the report. "Thus, the majority of uninsured women would likely face significantly higher premiums and deductibles than quotes obtained by our study." The authors conclude that unless tax credits are coupled with options to buy into group insurance, individual insurance market reforms, or other protections, participation rates among low-income women are likely to be low.