New Health Exchange Rules Show Important Improvements

March 13, 2012 at 2:54 pm

Health reform took a major step forward this week, as the Department of Health and Human Services (HHS) released the final rules detailing the standards for the health insurance exchanges that the Affordable Care Act calls for.

These competitive marketplaces are a centerpiece of health reform and will give individuals, families, and small businesses multiple options of private health insurance plans that meet basic standards.  States planning to set up their own exchanges now have much of the information they need to move forward.

While we are still reviewing the new rules, several improvements since HHS’s initial proposals are worth highlighting.

  • The final rules strengthen the standards for “Navigators” — entities that are supposed to provide, with funding from the exchanges, accurate and unbiased information to consumers about available health coverage options.  The final rules require exchanges to develop conflict-of-interest and training standards for Navigators.  And, while it was already clear that health insurance companies could not serve as Navigators, the final rules state that associations that include insurers or lobby on their behalf cannot be Navigators either.  Meanwhile, Navigators cannot receive compensation from an insurer for enrolling individuals or employees in any health plan, including plans available outside the exchange.
  • Under HHS’s proposed rules, a family’s income would have to drop by 20 percent from what was on their prior tax return before the exchange would take that decrease into account in determining the amount of help the family would get to pay premiums.  Rightly recognizing that this approach would make coverage unaffordable for many families, the final rules allow exchanges to take all income declines into account.  As a result, people who need help paying their premiums are far more likely to get the right amount of assistance.
  • The final rules require exchange governing boards both to include at least one voting member who represents consumer interests and to ensure that insurers and other parties with a conflict of interest do not make up a majority of the board.  We hope that states will go beyond these minimum standards and further strengthen consumer representation on their exchange boards.

Just the Basics

March 12, 2012 at 5:30 pm

Using weekly data from the Bureau of Labor Statistics, we updated our backgrounder today on how many weeks of unemployment insurance benefits are available across the country (see map).  It’s part of our Policy Basics series — short, non-technical reports on topics ranging from the federal budget process to the Temporary Assistance for Needy Families (TANF) program.

Other Policy Basics that we have updated recently include those on SNAP (formerly the Food Stamp Program) and the Earned Income Tax Credit (EITC).

The Myth of the Non-Paying 47 Percent

March 12, 2012 at 4:31 pm

The argument that we should raise taxes on the bottom half of households because too many of them don’t owe federal income tax doesn’t take the tax system as a whole into account, our former colleague Aviva Aron-Dine explains in a new piece in the Milken Institute Review.  Here’s an excerpt:

These are tough times, especially for low- and moderate-income families. For much of 2011, the unemployment rate exceeded 9 percent, and was higher among those without a college education. Last year, 15 percent of Americans lived in poverty, up from 12 percent before the recession. Meanwhile, the median income of working-age households fell sharply for the third year in a row. And that decline came on top of more than three decades of sluggish growth for all but the highest earners.

Yet to hear some people tell it, one of the major problems facing America is that the bottom half of U.S. families is getting off too easy. Every major candidate in the Republican presidential race, along with the Republican congressional leadership, has expressed outrage over the fact that 47 percent of households didn’t owe any federal income tax in 2009. …

But the picture changes dramatically once other federal taxes are included. When all federal taxes are taken into account, even the lowest fifth of households (with average incomes of about $18,000) pay 4 percent of income in federal taxes, while the second-lowest fifth (average income: $43,000) pay 11 percent. . . .

State and local tax systems are typically quite regressive, meaning that low-income families pay more of their income in taxes than higher-income families. When state and local taxes are taken into account along with federal taxes, the poorest fifth of households pays about 15 percent of income in taxes; the next fifth pays about 21 percent.

These figures give the lie to the idea that there is a large class of Americans who “don’t pay taxes.” To the contrary, they show that the federal income tax is one of the few taxes that doesn’t impose higher burdens on low- and moderate-income households than on upper income ones. The overall U.S. tax system is progressive only because the federal income tax is very progressive. Put differently, we’ve chosen to concentrate almost all of the system’s progressivity in the Federal income tax. . . .

Ultimately, the 47 percent statistic is just a distraction from important policy choices. We can close future deficits through spending cuts or tax increases, or a combination of the two. We can split the burden in myriad ways. And what you take to be the fair approach logically depends on your views on a variety of issues. But it doesn’t depend on how many people fall on one or the other side of zero liability when they fill out their federal income tax returns.

In Case You Missed It…

March 9, 2012 at 4:17 pm

This week on Off the Charts, we focused on the economy, income inequality, and our special series on extreme poverty.

  • On the economy, Chad Stone examined the February jobs report, noting that despite another solid month of job growth, the recovery still has a long way to go to restore a strong labor market.

    Nick Johnson pointed out that the jobs report showed an uptick in state and local education employment after several years of large job losses.

  • On income inequality, Chuck Marr showed that even in 2009, a “down” year for high earners, the top 1 percent of households had more total Adjusted Gross Income than the bottom 50 percent.

    Chad Stone noted that the share of the nation’s income going to the top 1 percent rebounded in 2010, and he contrasted those gains with the increase in the number of people in severe poverty in recent years.

    Hannah Shaw noted that the income gains for the top 1 percent in 2010 occurred mostly at the very top of that group.

  • On extreme poverty, for which we wrote a three-part series, Arloc Sherman highlighted a new study showing that the number of families living on less than $2 per person a day more than doubled in the last 15 years.

    Stacy Dean showed that SNAP (food stamps) is a powerful antidote to extreme poverty, and Barbara Sard explained that proposals to raise rents on the poorest recipients of federal housing assistance would add to the hardships of families in extreme poverty.

In other news this week, we released Chad Stone’s statement on the February jobs report and a report on the increase in income concentration at the top in 2010.

Education Job Losses Finally Ending?

March 9, 2012 at 1:54 pm

After several years of bad employment news in the education sector, today’s jobs report suggests that school districts are starting to hire again.  But, this good news for students, teachers, communities, and the economy comes with several caveats, as I explain below.

State and Local Payrolls Have Shrunk DramaticallyNew and newly revised data from the Bureau of Labor Statistics (BLS) shows that local school districts added 5,000 jobs in February.  State colleges and universities added 2,000 more.  That’s on top of the 15,000 education jobs added in January, according to BLS’s revised numbers. This is the first time since late 2009 that the nation’s schools have added jobs for two months in a row.

As for the caveats:

First, state and local government employment outside of education, which includes law enforcement, parks, transportation, and so on, fell by 7,000 jobs.  So, even with an increase in education, state and local employment in aggregate was flat.

Second, when it comes to aggregate state and local employment, we still have a long way to go in order to recoup the job cuts of recent years.  States, localities, universities, and school districts have cut 647,000 jobs since overall state and local employment peaked in August 2008 (see graph).

Third, even as the number of state and local employees has fallen, the need for the services they provide has risen.  There are more students in public schools and in public colleges and universities, so these institutions need more personnel just to accommodate the rise in the number of students that they teach.  The number of participants in various public programs has grown as well — as has the entire U.S. population, which relies on states and localities to provide health, transportation, public safety, and other services.