Demos push plans for affordable health insurance
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Front-runners Hillary Clinton and Barack Obama, as well as former candidate John Edwards, who dropped out Wednesday,have put forth proposals to make health coverage more accessible and affordable.
Inspired by existing health reforms in Massachusetts, their proposals would prohibit insurers from rejecting individuals or charging them higher rates because of preexisting health conditions.
But forcing insurers to cover everyone won’t necessarily solve the problem. States that have so-called guaranteed-issue laws, such as New York and New Jersey, have some of the highest health-insurance rates in the U.S. That means that healthy people in those states often decide not to buy coverage until they get sick, which further boosts costs for everyone.
Guaranteed issue could work if everyone were persuaded to buy coverage, spreading the risk among more people and pushing down prices. So Clinton, Edwards and Obama have each proposed a so-called mandate requiring individuals to be covered by insurance.
For example, Clinton and Edwards would require most employers either to provide coverage for their employees or to contribute to the cost. Clinton would exempt most small employers but offer them a tax credit as an incentive to provide coverage. Obama breaks with his opponents. He would require that all children have insurance but not all adults.
Mandates need teeth to encourage people to sign up, and that means premiums have to be affordable. Otherwise, healthy individuals can decide it’s less expensive to pay a penalty for not enrolling than to buy the insurance. That’s what has happened in Massachusetts, where the only penalty in 2007 for not having coverage was loss of a personal income-tax exemption of $217 ($437 for families).
For low- and middle-income people, affordability means subsidies. Obama would expand eligibility for government plans, such as Medicaid and the State Children’s Health Insurance Program (SCHIP), in hopes that getting more people to sign up would lower premiums and encourage higher-income people to enroll on their own. Both Clinton and Edwards would also expand Medicaid and SCHIP, and they’d offer a refundable tax credit for middle-income families.
Subsidies, tax breaks and expanded government health plans all cost money — anywhere from an estimated $50 billion per year for the Obama plan to $120 billion for Edwards’s proposal. But those numbers are just funny money. The one thing that’s certain is that the plans would be expensive. All three candidates propose covering a chunk of the costs by rolling back tax breaks for households with incomes of more than $200,000 or $250,000.
All three candidates would also use market incentives to make it easier for people to buy coverage on their own. Significantly, each of them would also set up a public insurance program based on Medicare as an option — the closest they come to proposing national health insurance.
By Kimberly Lankford
Kiplinger’s Personal Finance
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