Key Strategies for Covering Uninsured Americans

Currently, more than one in six Americans under the age of 65, or 46 million individuals, lacks health insurance. Although a number of states, such as Massachusetts, have adopted strategies to expand insurance coverage to their uninsured populations, not all states will be able to do so, especially in light of the recent financial downturn, which has led to severe cuts in some state budgets.

The need for a federal solution has sparked a debate over how best to organize the health care system to provide coverage to uninsured Americans. To help inform this debate, the Kaiser Commission on Medicaid and the Uninsured has released a guide that describes key strategies for expanding coverage and explains and how different policy options can be combined to form comprehensive reform proposals. The guide organizes the policy strategies under four overall approaches: strengthening current coverage arrangements, improving the affordability of coverage, improving the availability of coverage, and changing the tax treatment and financing of health insurance.

Because of the rising costs of health care, improving affordability of insurance presents many challenges. However, no expansion in coverage is feasible if the issue of affordability is not addressed. The guide describes two basic strategies for doing so: subsidizing coverage or designing and offering lower-cost insurance products. The most common mechanisms for subsidizing coverage include tax deductions, refundable tax credits, or direct financial support to help pay premiums. Such subsidies could pay a fixed amount or a designated percentage of the premium. They could be extended to all individuals regardless of income or designed on a sliding scale. Less expensive insurance products—that is, those with lower premiums—typically cover fewer benefits and require higher cost sharing. The guide describes high-deductible plans, which can be combined with a health savings account to allow people to pay premiums and other medical expenses with pretax dollars. Young-adult plans represent another lower-cost product. Such plans are already being offered by insurance companies.

Reinsurance for high-cost claims is a third strategy for improving affordability. Such claims are incurred by a small share of individuals but represent a large share of total health costs. By limiting insurance companies' exposure to very high health costs, reinsurance programs enable insurers to lower the premiums they charge to employers and individuals. This type of program is a form of subsidy to the insurer that lowers the premium cost for all purchasers.

The final section of the guide, "Putting the Pieces Together," describes several proposals for expanding health coverage and reforming health care that have received attention in recent months, including those outlined by Senators Obama and McCain during the 2008 Presidential campaign. Other important proposals that have received less attention are also described in the guide, including a white paper released by Senator Max Baucus (D-Mont.), chairman of the Senate Finance Committee, and legislation—the Healthy Americans Act—proposed by Senators Ron Wyden (D-Ore.) and Robert Bennett (R-Utah).

The 39-page Approaches to Covering the Uninsured: A Guide is available on the Kaiser Commission Web site at www.kff.org/uninsured .