Tax Credit Would Cover Only Part Of The Cost Of Buying
Many Individual Insurance Policies In California

Premiums For Individual Products Have Increased Substantially,
But Consumers Have Not Shifted To Less-Generous Policies

Bethesda, MD—A $1,000 tax credit to purchase an individual health insurance policy would cover less than half of the average insurance premium for single coverage in California, according to an analysis of premium data published today.

About one-fourth of thirty-year-olds enrolled in an individual plan in California paid a single-coverage premium that would be covered by the $1,000 tax credit, but fewer than 5 percent of fifty-year-olds paid a premium of $1,000 of less, according to the paper by Melinda Beeuwkes Buntin, an economist with RAND in Arlington, Virginia, and four colleagues. It is one of two California-specific papers being published today by Health Affairs with support from the California HealthCare Foundation.
California insurance market. In "Trends and Variability in Individual Insurance Products in California," Buntin and colleagues analyzed individual and family health insurance products offered by the three largest carriers in California's individual market between 1997 and 2002. They found that average premiums for individual coverage rose by 40 percent from 1997 to 2002 (from $154 to $211 per month for single coverage).

Rising premiums have led to predictions that individuals would opt for "bare-bones" policies in exchange for more affordable premiums. The study found, however, that on average the proportion of health care expenditures covered by individual insurance policies remained constant, at about 75 percent over the six-year period.
While that proportion remained constant, the study reports significant variability among the products offered, both in premiums and in the share of spending that they cover. The study found that the coverage offered under individual policies reflects the preferences of customers and that the variability in coverage indicates diversity in the kinds of plans consumers choose to buy.

Consumers' ability to buy coverage that matches their own needs is often viewed as one of the attractive features of the individual insurance markets, note the authors. However, standardized, comparative information would aid consumers shopping in a complex market with many choices and different prices for similar products.
Buntin's coauthors were Jose J. Escarce, a professor in UCLA's internal medicine division; Kanika Kapur and M. Susan Marquis, economists with RAND; and Jill Yegian, director of California HealthCare Foundation's Health Insurance Program.

Covering parents of publicly insured children. The second paper, "Who Enrolls in a Program for Parents of Publicly Insured Children?" by Erin Fries Taylor and colleagues, evaluates a program that subsidizes health care coverage for the parents of children already in public insurance programs in Alameda County, California.
The adult program, Alliance Family Care, is not part of Medicaid or the State Children's Health Insurance Program (SCHIP), but rather an HMO product offered by a local health plan that enrolls uninsured parents with household incomes up to 300 percent of poverty. For parents to be eligible, their children must be enrolled in the health plan, typically through public insurance programs-for example, Medicaid or SCHIP-or the county program.

Despite the concerns of administrators, the program did not attract sicker enrollees, according to a survey conducted by Taylor, Jeffrey Kullgren, and Catherine McLaughlin. Their survey found that the parents enrolled in the Alameda County program reported better health and comparable health care utilization and unmet needs relative to other low-income adults in the county.

The survey also found that the parents were willing to pay a subsidized premium to enroll in the program and that the program itself has experienced low rates of disenrollment.

Taylor is a health researcher at Mathematica Policy Research but conducted this research while at the University of Michigan, Ann Arbor; Kullgren is a medical student at Michigan State University; McLaughlin in is a professor at the University of Michigan School of Public Health. Their paper also received support from the Robert Wood Johnson Foundation.


Health Affairs, published by Project HOPE, is a bimonthly multidisciplinary journal devoted to publishing the leading edge in health policy thought and research. The California HealthCare Foundation (CHCF) is an independent philanthropy committed to improving California's health care delivery and financing systems. For more information, visit www.chcf.org.

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©2003 Project HOPE–The People-to-People Health Foundation, Inc.