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Subsidies to Insurance System Overhead

Will Subsidies Meant for Health Services Go to Excess Insurance System Overhead?

Authors: Rick Curtis, Elliott K. Wicks

July 1994

Because a large proportion of uninsured and low-income workers and their families work for small firms, most new subsidies under health reform bills will be channeled to people who would need to seek coverage in the small-group insurance market. Most committee-approved bills would base the subsidy on the cost of the average-priced plan, which includes the high administrative costs found in the existing small-employer and individual health insurance markets. This analysis shows that in a number of circumstances 20% to 50% of a given federal subsidy expenditure could go to cover the extra cost for such administrative overhead.

This report was sponsored as an activity of the George Washington University Health Insurance Reform Project, with funding from the Robert Wood Johnson Foundation.


This publication is available only in hard copy. Please contact IHPS for a copy.

See Also: Tax Subsidies