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Individual health insurance purchases tied to income levels

Policy makers are under increasing pressure to find ways to cover the uninsured. Many proposals encourage more people to buy individual health policies on their own. When consumers don't have access to group health plans at work, individual coverage becomes the next option.

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There are a lot of folks financially trapped between group health and assistance programs such as Medicaid: They don't have health insurance through work and they don't qualify for Medicaid, but they can't afford individual health policies.

Currently, the purchase of individual health insurance rises and drops with income, according to a February 2008 study by the Kaiser Family Foundation (KFF), which used data from 2000 to 2003. As income increases, so does individual health coverage. Further:

  • Very few people at lower incomes purchase individual coverage: One in 20 purchase plans among those with incomes at the federal poverty level ($18,660 for a family of four in 2003 dollars).
  • Among those with incomes between 50 and 250 percent of the poverty level, only 4 to 11 percent purchase coverage.
  • At four times the poverty level, about a quarter of individuals purchase coverage.
  • And among those with incomes at least 10 times the poverty level, only about half purchase coverage.

Coverage rises as income goes up among the self-employed, too, although they still purchase individual health plans at greater rates, perhaps in part due to the income tax premium deduction they can take:

  • Ten to 16 percent of the self-employed purchase coverage between 50 and 250 percent of the poverty line.
  • About 30 percent of the self-employed purchase coverage when their income reached 200 to 400 percent of the poverty level.
  • Above 450 percent of the poverty level, close to half purchase insurance.

Overall, at higher incomes, families with children purchased insurance more than single adults.

KFF speculates that those with lower incomes simply can't find coverage that's affordable, or that it's not an attractive product. KFF points out that policy makers will need to provide substantial subsidies, and extend subsidies to higher income levels, in order to successfully encourage the purchase of individual health plans.

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