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Increasing Health Insurance Coverage Return to Informing the Health Care Debate »
In 2007, about 45.7 million people in the U.S. were uninsured. The uninsured come from every income level, age group, employment status, gender, race, ethnicity, and region of the country. Health care coverage protects individuals against the financial risk that might result from unpredictable and expensive health care needs. Individuals who have health care coverage tend to receive more preventive care, are less likely to avoid or delay needed medical care because of cost, and may have better health outcomes than patients without coverage. Increasing the proportion of people with adequate protection from financial risk due to health care expenses is a cornerstone of many health care reform proposals. The most widely discussed options for expanding coverage to the uninsured include employer mandates, individual mandates, refundable tax credits, and expanding Medicaid/SCHIP eligibility. RAND analysts have used microsimulation modeling methods to predict the effects of specific policy scenarios on health care coverage and health spending.
Individual Mandates
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RAND analysts estimated that a stand-alone individual mandate, depending on design of the policy, would likely increase the number of people with coverage by 9 to 34 million.
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RAND's microsimulation modeling also suggests that an individual mandate is not likely to substantially increase national health expenditures as a whole, although government spending (including Medicaid) would increase.
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Key features of individual mandates that will determine the effect on coverage and spending are the generosity of the subsidies available to purchase insurance and the size of the penalty for failure to comply with the mandate.
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Employer Mandates
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RAND's microsimulation model estimates that 1.8 to 3.4 million people would likely become newly insured under a specific stand-alone employer mandate option.
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The modeling also finds that a stand-alone employer mandate would likely have no discernible effect on total health care spending, consumer out-of-pocket spending and Medicaid expenditures.
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The largest effect of an employer mandate would be on the firms that are subject to the mandate, although increases in premium payments under a stand-alone employer mandate would be modest.
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Key design considerations are defining the types of firms that will be exempt from a mandate and the size of the penalty for firms that do not offer coverage.
Refundable Tax Credits
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RAND's microsimulation model estimates that, depending on design of the tax credit, 2.3 to 10 million people would become newly insured as a result of the introduction of a refundable tax credit for individuals and families.
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Published estimates of the magnitude of the increase in coverage vary widely and depend on assumptions about the size and structure of the credit; the extent to which the credit is used to purchase coverage; and estimates of how coverage will shift among individual, employer-sponsored, and public programs.
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We estimate that refundable tax credits for individuals and families would likely have no discernable effect on total health care spending; however, we estimate moderate to small increases in both net government spending and consumer out-of-pocket spending.
Medicaid/SCHIP Eligibility
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RAND's microsimulation model estimates that 6 to 35 million people would newly enroll in Medicaid depending on the new income level for eligibility.
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Crowd-out of private insurance, whereby individuals switch from group or other coverage to Medicaid/SCHIP, may account for more than 50 percent of new Medicaid/SCHIP enrollees under this specific scenario.
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Using RAND's microsimulation model, we estimate that there would likely be little change in aggregate national health spending associated with a Medicaid/SCHIP expansion, however, there would be net increases in government spending, and small decreases in consumer out-of-pocket spending.
In addition to the microsimulation modeling analysis, other RAND studies have addressed some of the questions policy makers ask about coverage options:
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Is offering high deductible health plans a reasonable alternative to providing plans with lower deductibles?
A high deductible health plan (HDHP) is an increasingly common type of fee-for-service insurance plan with a deductible larger than the usual indemnity plan (usually $1,100 per year or more for single coverage; $2,200 or more for families). Many such plans are accompanied by a savings option that allows people to set aside pretax dollars for out-of-pocket health care expenses up to the deductible. The effect of HDHPs on coverage is uncertain; studies to date are scarce and have shown mixed results. -
Is the burden of providing coverage greater for small employers?
Some types of coverage expansion could have a disproportionate effect on small business. RAND analysts found that from 2000 to 2005, the economic burden of providing insurance increased for employers, particularly for the smallest firms. RAND also examined the effects on small businesses of two approaches to increasing coverage: small group health insurance reforms focused on regulating the market (such as premium rating reforms; guaranteed issue or renewal and regulations on pre-existing conditions); and HDHPs. RAND's work found that, to date, there is no evidence that either approach has improved employee access to care or the affordability of health insurance for small business. New policy approaches including purchasing pools may better address the underlying reasons for escalating costs.