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October 17, 2000
Dear Representative:
Consumers Union urges you to oppose legislation
that would provide individuals who purchase health insurance with a
new tax deduction. It is the wrong way to reduce the ranks of the
uninsured and underinsured, because this proposed individual tax
deduction:
· Benefits people in high tax brackets more than those in low tax brackets. While the proposed deduction would provide fairly generous relief to those at the top tax brackets (39.6 percent), it would provide less relief to those in the 15 percent bracket and no relief at all to those with income too low to pay any income tax. It is simply not fair, notwithstanding other regressive provisions in the tax code, to build in new provisions that irrationally increase relief as income (and tax bracket) increases.· Could reduce employer-provided coverage. The proposal is likely to have the unfortunate side effect of providing financial incentives for employers to discontinue health insurance coverage, leaving more people to navigate the individual health insurance market on their own. The risk-spreading role of employer-based coverage would be eroded. Many would find that individual coverage is less comprehensive and more expensive.
· Increases reliance on poorly functioning individual market, which leaves high-risk individuals at a severe disadvantage. State regulation of the individual health insurance market varies considerably, and in most states it does not function very well. Individuals and families with serious pre-existing conditions are likely to be denied access to policies in the individual market, face severe restrictions in coverage (such as gaps in coverage for pre-existing conditions), or face unaffordably high premiums.
The estimated $40 billion over ten years could
be better spent expanding coverage for children, or expanding
coverage for parents of children enrolled in CHIP or Medicaid. It is
time for our nation to move towards affordable health care coverage
for all Americans. This proposed tax deduction would destabilize the
entire health care system since it could shift a large proportion of
coverage to an unprepared individual market. Absent serious reforms
of the individual market (such as adoption of a standard,
comprehensive benefits package, guaranteed issue, community rating,
and required coverage) combined with substantial subsidies (even
complete subsidization) for those with low income, increased reliance
on the individual marketplace could be a prescription for disaster
for the United States health care system.
Sincerely,
Gail Shearer
Director, Health Policy Analysis
Consumers
Union's Washington, DC Office
