Return to the blog »

Predicting a Turn for the Worse

Posted by: Ella Hushagen on Sep 16, 2008

A studyreleased today by Health Affairs showsthat Senator McCain's health plan would cause an estimated 20 million people tolose their employer-sponsored health care -- leaving them to fend for themselvesin a wild-westindividual health insurance market. McCain plans to tax insurance premiumsthat businesses pay on behalf of employees, and many believe that this willdiscourage employers from offering health benefits at all:

The elimination of the income tax preference for employer-sponsored insurance would cause twenty million Americans to lose such coverage. We note, however, that the effect could be much larger.

Senator McCain argues that Americans will be better off underhis plan because they'll have a refundable tax credit to use to purchase theirown health insurance coverage in the open market. However, the study releasedtoday indicates that the individual health insurance market, especially thederegulated market McCain proposes, will offer a far inferior option for theseworkers. Why?

1)      Thinner coverage.  Individual health insurance plans typicallycharge higher deductibles and copayments and cover fewer benefits than groupcoverage. According to the study's authors, families must pay $2000 more inpremiums per year for an individual market health plan that's as good as an equivalentemployer-sponsored group health plan.

2)      Less bang for your buck. More money iswasted in the individual market than in the group market on medicalunderwriting and administration, and less money is spent on delivering medicalcare.

3)      Declining value. The McCain tax creditwill not keep up with medical inflation (which is about twice that of inflationfor other products), and its value will erode over time.

4)      From bad to worse. We already know thatthe individual health insurance market offers precious few protections forconsumers. Senator McCain's proposal undermine even those protections that doexist. Cervical cancer screening? Mental health parity? The right to appealyour health plan's service denial to an objective third party?  Forget about it.

Finally, the study's authors point out that, not only doesSenator McCain's health plan take good employer health benefits away from atleast 20 million Americans, it will notmake a significant dent in the number of uninsured Americans:

What is clear from these estimates is that the McCain plan will not enable many more Americans to obtain health insurance-and it certainly will not achieve universal coverage. By our calculations, upwards of forty million Americans would be uninsured-and that number would likely grow over time.

We can do better.