Developing an Affordable Health Insurance Scale in Missouri

Conclusion

This paper develops an affordability scale for Missouri by examining income guidelines for non-health public programs; research on household budgets; current health spending; the Massachusetts experience; and costs and willingness to purchase insurance. Research into health care reform in other states suggests that how affordability is defined and enacted into policy greatly affects the viability of the proposed programs. To accommodate variations in demographics, geography, and life circumstances, policymakers should consider the following when designing health coverage policies for Missouri:

• Any affordability schedule should utilize a progressive scale as incomes increase. A progressive sliding scale will prevent people with lower incomes from paying a disproportionately higher share of their income for health insurance. Using an affordability scale with assumptions about the ability to pay will lead to a higher rate of take-up of insurance.
• People with very low incomes can pay only small amounts toward health care. Research shows that many low-income people struggle to pay for basic necessities and are likely to have negative cash low. Studies of household budgets in Missouri indicate that individuals below about 150 percent FPL ($15,600) and families below about 200 percent FPL ($35,200 for a family of three) may not earn enough to cover their basic needs. People at these income levels should pay only nominal amounts of health costs and will need public programs and subsidies to obtain insurance.
• The upper bound of affordability should be set at about 8.5 percent of income. Data suggests that people with higher incomes can reasonably afford health insurance at 8.5 percent of income. In Missouri, this point corresponds to incomes above 500 percent FPL ($52,000). People with unsubsidized, non-group premiums currently pay an average of 8.5 percent of income. After meeting basic needs, most people at a higher income level have sufficient discretionary income to cover health expenses. Because premium and cost-sharing variations may render insurance unaffordable for some people with incomes above this level, it is recommended that 8.5 percent of income be used as the upper limit for people with incomes above 500 percent FPL.
• A progressive sliding scale of affordability is needed. For those earning enough to make some contribution to their health care (although not necessarily the full cost), a sliding scale of affordability is recommended as a protection from financial hardship. In Missouri, this scale should progress from 1.8 percent to 8.5 percent of income for individuals earning between 150 and 500 percent FPL ($15,600 and $52,000).

Works Cited

1. Missouri Women's Council, "Missouri Family Affirming Wages: Financial Independence Measures for Missouri Families," 2007; Basic family budget calculator. Economic Policy Institute. http://www.epi.org/content.cfm/datazone_fambud_budget.
2. J. Holahan, J. Hadley, and L. Blumberg, "Seting a Standard of Affordability for Health Insurance Coverage in Massachusetts," 2006.
3. Overview of Catamount Health. Kenneth E. Thorpe. February 23, 2006. http://www.leg.state.vt.us/HealthCare/Overview_of_catamount_health_by_ken_thorpe_feb_2006.htm