Under current law, individuals switching from an employer who provides health insurance to another employer who does not will lose coverage. The concern has been raised that a guaranteed issue requirement would sharply raise the premiums on individual-based policies. Estimates vary, with some projecting increases of 2 to 5 percent, and others placing the increase between 10 and 15 percent. Because real consumer choice and genuine market competition are virtually non-existent in today's distorted health insurance market, it is inevitable that premiums would increase somewhat in the individual market under a guaranteed issue requirement. Fortunately, the House proposal makes two key adjustments in the federal tax code that would help offset the increase in premiums.
Medical savings accounts.
They would provide an incentive for healthy individuals to purchase at least catastrophic health insurance, thereby creating a solid and solvent risk pool to help offset the claims of future unhealthy enrollees. An increased tax deduction for the self-employed. Under current law, self-employed individuals are permitted to deduct 30 percent of the amount paid for health insurance for themselves and their dependents. The House bill would increase the deduction to 50 percent by 2003. While this would help, the federal tax code would remain biased against employees in employer-based health plans who prefer the security of choosing and owning their own plan.