Saturday, March 11, 2017

Income of Holders of Employer Sponsored and State Exchange Insurance

Income of Holders of Employer Sponsored  and State Exchange Insurance

Question:   How did the family income of holders of employer-sponsored insurance and holders of state exchange insurance differ in April 2014? 

What are the likely impacts of Republican proposals to change tax credits for the purpose of state exchange health insurance? 

Data and Methodology:  The MEPS 2014 consolidated database was used in this analysis.   The distribution of household income for holders of employer-sponsored health insurance (HPEAP14) is compared to distribution of household income for holders of state exchange insurance (HPXAP!4).   The income variable is POVCAT14, with five outcomes – poor, near poor, low-income, mid-income and high-income.  I present estimates of totals for the entire population based on weight PERWT14F.


Results:


Income Category for Holders of Employer Sponsored Health Insurance and State Exchange Insurance
Employer Sponsored Insurance
State Exchange Insurance
POVCAT
# of Policy Holders
% of Policy Holders
# of Policy Holders
% of Policy Holders
Poor
1,695,767
1.99
473,182
13.73
Near Poor
1,448,141
1.70
121,698
3.53
Low Income
6,523,589
7.66
502,303
14.58
Middle Income
26,352,508
30.96
1,339,863
38.88
High Income
49,109,053
57.69
1,008,712
29.27
Total
85,129,058.40
100.00
3,445,760
100.00


Description of Results:


First, observe that employer-sponsored insurance is a much larger segment than state exchange markets.   There is an estimated 85 million holders of employer-based coverage compared to around 3.5 million holders of state-exchange insurance.   (Note the holder of the insurance refers to the person taking out the insurance.   Often other family members are also covered.)

The difference in the household income of people who have employer-sponsored insurance and people who have state exchange insurance is stark.


The portion of people in state exchanges who are poor, near poor, low income, or middle income is higher than corresponding portion for employer based insurance.  

The proportion of holders who are poor is nearly seven times higher for state exchange markets than for employer-based insurance.  

The low-income proportion is nearly twice as high for state exchange markets than for employer-based insurance.

Over 57 percent of the holders of employer-based insurance have high-income defined as income exceeding 400 percent of the federal poverty line.   The corresponding figure is less than 30 percent for state exchange marketplaces?



Policy Discussion:

Current ACA tax credits are linked to income and phase out entirely for households with income at 400 percent of the federal poverty line.    The tax credits in the Republican plan range from $2,000 to $4,000 depending on age and only start phasing out for individuals when income reaches $75,000.  Phase out begins at $150,000 for families.

The ACA and the Republican plan are similar in that both plans only provide state exchange tax credits to people who do not have an offer of health insurance from their employer.

Go here for a useful article on ACA and Republican Plan Tax Credits:



Things that will happen if the Republican plan replaces the ACA:

Many poor, near poor, and low-income people will no longer be able to afford premiums on state exchange policies.   These people with either forego insurance or will have their policies lapse when income falls.    Under the Republican health care plan, people with lapsed insurance payments will pay a 30 percent penalty for a year and may also have to pay higher premiums if they have pre-existing conditions.

The decision about whether to offer or not offer health insurance to employees is dominated by the needs of middle or upper-income workers.   Many firms will decide to eliminate offers of employer-based coverage to their employees so these employees can claim tax credits on state exchanges.   The tax credits are free cash available only if the firm does not offer health insurance to their employees.

Some firms may use the cost savings from the elimination of firm-sponsored health insurance to increase other fringe benefits in order to retain employees.  

Some low-income or poor workers at firms that formerly offered health insurance may not be able to afford insurance on state exchanges. 


Concluding Remark:  The more generous tax credits to middle and upper income workers will likely result in many firms eliminating their offers of employer-based coverage.   Many poor people may be unable to afford health insurance on state exchanges under the Republican plan. 














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