The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.
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Abstract
Enrollment into HCTC advance payment rose from 4,000 in September 2003 to nearly 16,000 in December 2005. Between 13 and 21 percent of eligible individuals received HCTCs in some form during the latter month. Surveys of beneficiaries and officials confirm that unaffordable coverage and program complexity are the main barriers to enrollment. Nevertheless, West Virginia enrolled between 43 and 59 percent of eligible beneficiaries; a project in Virginia enrolled more than 90 percent of callers who waived confidentiality of tax records; and HCTCs covered 53 percent of eligible Bethlehem Steel retirees. Future credits could be structured to increase enrollment substantially.
Introduction
After thousands of theoretical studies examining the possible use of federal income tax credits to subsidize coverage for the uninsured, such credits were finally enacted as part of the Trade Act of 2002. The first example of policies along these lines since the ill-fated “Bentsen child health credits” of the early 1990s, Health Coverage Tax Credits (HCTCs) represent a unique opportunity to learn, from experience rather than speculation, what role federal income tax credits could play (if any) in broader reforms.
Several months after the credits first became available in advanceable form, observers began expressing the concern that few eligible individuals were using HCTCs, a concern that has been reiterated over time. This report reexamines the issue of HCTC take-up from the vantage point of several years experience with the program, to ask the following questions:
- How many eligible beneficiaries use HCTC to enroll in coverage?
- What are the main factors limiting enrollment?
- Are there any examples of successful HCTC enrollment?
- How could future tax credits or a revised HCTC program be structured and implemented to increase the proportion of eligible, uninsured individuals who use such credits to purchase health coverage?
This report assumes familiarity with the HCTC program. For the reader who desires background information, detailed explanations are available from several sources.
Note: This report is available in its entirety in PDF Format.
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Disclaimer: The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.
