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					     Uncovered Worker Pool:
          Coverage & Costs
                                                           Gerard Russo
                                                          Sang-Hyop Lee
                                                           Lawrence Nitz
                                           University of Hawai`i at Mānoa

                                      Hawai`i Coverage For All Project
                                               Technical Workshop IV
                                                  September 26, 2003
 This research is f unded in part through a U.S. Health Resources and Services Administration, State Planning Grant to the Hawaii State
Department of Health, Prime Contract No. 1 P09 OA 00046-01. Sub-Contract Research Corporation of the University of Hawaii, Pro ject
 No. 659075. Research conducted by the University of Hawaii, Social Science Research Institute in collaboration with the Hawa ii State
    Department of Health, Hawaii Institute f or Public Af f airs/Hawaii Uninsured Project and the Hawaii Health Inf ormation Corporat ion.
     POLICY SCENARIO
          Imposition of an individual mandate for the
           self-employed and part-time workers under a
           publicly-sponsored, privately-financed,
           privately-underwritten insurance pool.




26 September 2003
                           Preliminary results. Please do not quote.
     Design Features
           Mandatory
                   Mandatory: without selectivity
           Single Coverage
                   Family coverage to be modeled later.
           Private
           Financing
                   Premiums
                   Federal Tax Deductions

26 September 2003
                                    Preliminary results. Please do not quote.
 Sub-Cases for Self-Employed
 & Part-Time Worker Health
 Insurance Scenario
                             Voluntary                                   Mandatory
                             Purchase                                    Purchase
              Standard                                                   †
              Private Plan
              Standard
              Public Plan
              Ultra-Basic
              Public Plan
26 September 2003
                             Preliminary results. Please do not quote.
  Uninsured Adults Age 19-64:
  BRFSS 2001
                                            Persons                Percent
                                                                   Distribution
    Uninsured Self-Employed 17,175                                 27%

    Uninsured Employees                     16,747                 26%
    Other Uninsured Adults                  29,566                 47%

    Total Uninsured Adults                  63,488                 100%

26 September 2003
                       Preliminary results. Please do not quote.
 Uninsured Self-Employed
 Adults Age 19-64: BRFSS 2001,
 CPS 1996-2002
      Survey Year                          Uninsured Self-
                                           Employed Persons
      BRFSS 2001                           17,175

      CPS 1996-2002                        11,838

            Sources: Behavioral Risk Factor Surveillance System Survey 2001,
            Current Population Survey March Demographic Supplements 1996-
26 September2002.
            2003
                                    Preliminary results. Please do not quote.
Uninsured Self-Employed and
Uninsured Part-Time Employees,
Adults Age 19-64: CPS 1996-2002

       Worker Status                        Uninsured Persons
       Part-Time                            46,522
       Self-Employed                        11,838
       TOTAL                                58,360
       Source: Current Population Survey March Demographic
       Supplements 1996-2002, 7-year Average.


26 September 2003
                                Preliminary results. Please do not quote.
  Persons Covered
         How many self-employed and part-time workers will
          be targeted under this initiative?
              58,360, Based on CPS 1996-2002
         Of those covered, how many previously had health
          insurance?
              Switching from private to private
              Will the switch be to a more extensive plan or less
               extensive plan?
         How many self-employed and part-time workers will
          seek full-time employment to avoid the individual
          mandate?
         How many self-employed persons will become newly
          insured?
              58,360, Assuming 100% Compliance and No Avoidance
26 September 2003
                                     Preliminary results. Please do not quote.
 Cost
     What is the expected total expenditure per year
      per self-employed and part-time worker insured?
     What is the current expenditure level for medical
      services for uninsured self-employed persons?
     What is the economic cost (benefit) accruing to
           Federal Taxpayers
           State Taxpayers
           Health Care Providers
           Households with Self-Employed and Part-time
            Workers
           Others
26 September 2003
                              Preliminary results. Please do not quote.
     Incurred Per Capita Expenses
     2001: Uninsured Self-Employed Adults
     Age 19-64
        Emergency Room & Hospital                          $403
        Inpatient Discharge
        Hospital Operated Clinics                          ?
        Private Physician Offices                          ?
        Primary Care Facilities                            ?
        Pharmaceuticals, etc.                              ?
        TOTAL                                              $403
        Note: Imputed from the age-sex profile of expenses of the
        uninsured from the HHIC ER and hospital discharge data 2001 and
        BRFSS 2001.
26 September 2003
                                  Preliminary results. Please do not quote.
     Per Capita Expenses: US 2001
     Privately Insured Person            $2,484



     Full-year Uninsured                 $1,253
     Person


     Source: Hadley and Holahan, “How Much Medical
     Care Do The Uninsured Use, And Who Pays For It?”
     HEALTH AFFAIRS-Web Exclusive 12 February 2003.

26 September 2003
                           Preliminary results. Please do not quote.
     Tax Issues
          What proportion of this cost will be borne by
           federal taxpayers via federal tax deduction for
           self-employed health insurance purchase?
               Adjustment to gross income
               2002: 70%*Marginal Tax Rate
               Scheduled to rise to 100%
          How many newly insured self-employed
           persons will avail themselves of the SE
           Health Insurance Deduction?
               20%?
26 September 2003
                               Preliminary results. Please do not quote.
      SE Health Insurance Deduction:
      Federal Marginal Tax Rate
      Medicare Hospital Insurance (HI) Federal Payroll
       Tax
            2.9% Wage Tax (1.45% + 1.45%)
      Social Security: Old Age Security and Disability
       Insurance (OASDI) Federal Payroll Tax
            12.4% Wage Tax (6.20% + 6.20%)
      Federal Income Tax
            15.0% for a typical household
      TOTAL FEDERAL MARGINAL TAX RATE
            30.3%
26 September 2003
                                Preliminary results. Please do not quote.
 Cost of Single Coverage Per Year:
 Based on 58,360 persons
                                       Per Capita Total

 Annual Single Premium                 $2698                         $157,455,280
 Hawaii MEPS-IC 2001
 Less Current Medical                  $1253                         $73,125,080
 Expenses: US 2001
 Less Federal Tax                      $33                           $1,929,594
 Deduction: 20%*30.3%
 (Self-Employed Only $163)
 TOTAL                                 $1412                         $82,400,606
26 September 2003
                         Preliminary results. Please do not quote.
   Possible Refinements
     Effective Tax Rates: Household Specific
     Estimate Moral Hazard Effect
     Medical Expenditures Incurred by the Uninsured
      Self-Employed and Part-Time Workers: Extend
      to All Hawaii Provider Types
     Premium Rates: Self-Employed/Part-Time
      Specific
     Bring Estimates Forward in Time: 2003, 2004
     Extend Analysis to Family Coverage
     Voluntary Plan with Selectivity and Subsidy
     Equilibrium adjustment of employment and self-
      employment.
26 September 2003
                        Preliminary results. Please do not quote.

				
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