A Decade of Erosion in Employer-Sponsored Health Insurance in Kentucky

According to a new report from the Economic Policy Institute (EPI), 200,000 fewer non-elderly Kentuckians had health insurance through an employer in 2010 than in 2000. The report finds that employer-sponsored insurance declined 9.3 percentage points over that period. Only 58.7 percent of Kentuckians under age 65 had this type of coverage in 2010.

The EPI report describes how, at the national level, those with lower levels of education and lower wages are less likely to have health insurance through an employer—or be insured at all.1 According to the report, “Nearly one-third of all workers in the lowest 40 percent of the wage distribution are uninsured, compared with less than one-eleventh of workers in the top 40 percent.” The report also documents racial disparities in health insurance coverage. In 2010, non-Hispanic whites experienced rates of coverage through an employer 71 percent higher than those of Hispanics and 48 percent higher than those of blacks.2

The decline in employer-sponsored health insurance is not just because of the bad economy of the last few years. Of those working, 8.5 percentage points fewer had employer-sponsored insurance in 2010 than in 2000. And employer-sponsored coverage in Kentucky declined 7.3 percentage points just between 2000 and 2007—before the most recent recession. The erosion of coverage is evidence of the continued inadequacies of our employer-based health insurance system in the face of rising health care costs.

While Medicaid continues to provide coverage for the very poor—and enrollment is growing rapidly—most working families without employer-sponsored insurance currently do not qualify for Medicaid yet cannot afford individual insurance plans. More than 826,400 adults currently participate in Kentucky’s Medicaid program, and enrollment is expected to continue growing at an estimated 1,550 new members a month. 3 However, current state Medicaid guidelines disqualify all but the very poor; for instance, for a family of four, monthly income after deductions can be no more than $383.4

Should it survive court challenges, health reform will help address this gap and provide affordable health insurance for working families. The Affordable Care Act will expand Medicaid to qualify those with incomes up to 133 percent of the poverty level and will provide health insurance options for individuals, families and small businesses through the operation of health care exchanges. 5 As a result of full implementation of the legislation in 2014, the share of nonelderly Kentuckians who are uninsured is expected to decrease 13.1 percentage points—from 20 percent before reform to 6.8 percent after. Only six other states are expected to see a more significant decrease.6

 insurance coverage

Source: Economic Policy Institute Analysis of US Census Bureau Data

 

  1. Elise Gould, “A Decade of Declines in Employer-Sponsored Health Insurance Coverage,” Economic Policy Institute, February 23, 2012, http://www.epi.org/publication/bp337-employer-sponsored-health-insurance/.
  2. State-level analyses were not provided.
  3. Department for Medicaid Services, “Biennial Budget Overview 2013-2014,” presentation to the House Budget Review Subcommittee on Human Resources, February 1, 2012.
  4. Kentucky Department of Health and Family Services, http://chfs.ky.gov/dms/apply.htm. Retrieved February 17, 2012.
  5. Under the Affordable Care Act, Kentucky Medicaid would see approximately 300,000 newly enrolled non-elderly adults, and 306,000 non-elderly adults are predicted to receive coverage through nongroup healthcare exchanges. Matthew Buettgens, John Holahan, and Caitlin Carroll. “Health Reform Across the States: Increased Insurance Coverage and Federal Spending on the Exchanges and Medicaid,” Urban Institute, March 2011, http://www.urban.org/UploadedPDF/412310-Health-Reform-Across-the-States.pdf.
  6. Matthew Buettgens, John Holahan, and Caitlin Carroll. “Health Reform Across the States.”

Tax Expenditures Big Cause of Budget Problems, but Some Legislators Want More

There are three main reasons that the budget the legislature is now considering includes so many cuts. First, the economy is still struggling. Second, federal recovery-related financial assistance to the states is gone. And third, Kentucky’s tax system needs to be reformed. One reason for the third problem is that the General Assembly typically puts in place new “tax expenditures” every time it meets.

Tax expenditures are special tax preferences, rates or exemptions that benefit particular groups, industries or activities. Just like spending on the budget, they are a way the state allocates dollars. Kentucky has well over 200 tax expenditures, and collectively they are a huge and growing drain on revenue. 

After a tax expenditure is enacted, the General Assembly typically never goes back to assess whether it achieves its intended benefit, and if that benefit is worth the lost revenue.

As before, the 2012 regular session includes a slew of new tax expenditure proposals, including the following:

  • HB 10: Provides an income tax credit to those contracting for services with legally blind or severely disabled individuals.
  • HB 22: Provides a tax credit to employers providing paid leave to those donating organs or bone marrow.
  • HB 24: Lowers and provides exemptions to personal property taxes and sales taxes for veterans’ organizations.
  • HB 66: Creates an income tax credit for those who make contributions to scholarships for students at private K-12 schools.
  • HB 96 and HB 101: Imposes a sales tax holiday.
  • HB 97: Excludes the delivery charges for direct mail from the sales tax.
  • HB 113: Creates a tax credit for “angel investors,” who are individuals that invest in early-stage businesses.
  • HB 136: Exempts bees and beekeeping supplies and equipment from the sales tax.
  • HB 150: Allows a tax deduction for health care providers for the costs of providing charitable care services (health care to uninsured persons who do not pay).
  • HB 162: Makes it voluntary for corporations to file consolidated tax returns (consolidation is a strategy to decrease tax avoidance).
  • HB 192: Provides a tax credit for costs associated with installing insulation in houses that are near airports.
  • HB 193: Provides an income tax credit of $1,000 for each volunteer firefighter.
  • HB 205 and HB 285: Exempts purchase of equipment and supplies for the horse industry from the sales tax.
  • HB 211: Allows the homestead exemption for service-connected totally disabled veterans to be transferred to the surviving spouse upon the death of the veteran.
  • HB 212: Provides a sales tax refund of up to $3,000 for new small businesses.
  • HB 245: Provides income tax credits for those who convert vehicles to burn natural gas or who buy new vehicles that do so.
  • HB 246: Provides tax incentives for large alternative energy and renewable energy manufacturing facilities, and exempts equipment used in drilling geothermal wells from the sales tax.
  • HB 288: Exempts drugs used in treating farm animals from the sales tax.
  • HB 312: Provides a credit against income taxes for property taxes paid by distillers for distilled spirits aging in barrels if the funds are used for capital improvement projects.
  • HB 393: Exempts governmental non-profit self-insurance groups that provide insurance coverage for government employees from the insurance premium tax.
  • HB 397: Exempts manufactured homes from the sales tax.
  • HB 400: Expands a program that provided tax breaks to Ford Motor Company for reinvestment to make Toyota, GM and large auto parts suppliers eligible.
  • HB 405: Expands the number of employees for which tax credits are provided for tuition at UPS-affiliated Metropolitan College in Louisville, and removes the sunset date for the tax credit.

It is easy to find people who would support and defend any one of these proposals. And many of these bills may, in fact, be good ideas.

But the reality is that all of them cost the state money, and some of the costs are substantial. The current budget discussion in Frankfort underlines the reality that tough choices must be made about the allocation of public dollars. A tax expenditure, just like any other use of public monies, must be measured against whether it is the highest and best use of those dollars, or whether the monies would best be spent elsewhere.

Tax expenditures are an increasingly popular way to spend public dollars because there are structural biases that favor them over spending on the budget. Tax expenditures come off the top, before monies are spent on anything else. Tax expenditures exist in perpetuity, while programs funded through the budget must receive new appropriations every two years—and in recent years have been severely cut. Also, politicians proposing tax expenditures can claim to be cutting taxes while at the same time increasing spending for a particular purpose.

Since the state loses a huge amount of revenue from tax expenditures, we need structural changes that allow us to more closely assess this spending.

One way to better address the problem would be to establish a statutory legislative committee whose responsibility is to review all state tax expenditures regularly on a rotating basis. The General Assembly already has committees that conduct program review, administrative regulation review, and oversight of capital projects and bond issues. Given that we spend roughly as much through tax expenditures as we do through the budget, it makes sense to put better systems in place to determine whether we’re getting our money’s worth.

Committee staff could analyze the effectiveness of each tax expenditure in relation to its purpose, describe who benefits, and identify the cost. A “Tax Expenditure Review Committee” could then make recommendations about whether to limit, expand, sunset, or revamp each measure, and their recommendations could feed into the biennial budget process.

Tax expenditures have become a major way that state government in Kentucky, as elsewhere, allocates resources. It only makes sense that mechanisms be put in place to evaluate what we are getting as a result.

For more on tax expenditure reform in Kentucky, see this policy brief.

Tax Expenditures Big Cause of Budget Problems, but Some Legislators Want More

There are three main reasons that the budget the legislature is now considering includes so many cuts. First, the economy is still struggling. Second, federal recovery-related financial assistance to the states is gone. And third, Kentucky’s tax system needs to be reformed. One reason for the third problem is that the General Assembly typically puts in place new “tax expenditures” every time it meets.

Tax expenditures are special tax preferences, rates or exemptions that benefit particular groups, industries or activities. Just like spending on the budget, they are a way the state allocates dollars. Kentucky has well over 200 tax expenditures, and collectively they are a huge and growing drain on revenue.

After a tax expenditure is enacted, the General Assembly typically never goes back to assess whether it achieves its intended benefit, and if that benefit is worth the lost revenue.

As before, the 2012 regular session includes a slew of new tax expenditure proposals, including the following:

  • HB 10: Provides an income tax credit to those contracting for services with legally blind or severely disabled individuals.
  • HB 22: Provides a tax credit to employers providing paid leave to those donating organs or bone marrow.
  • HB 24: Lowers and provides exemptions to personal property taxes and sales taxes for veterans’ organizations.
  • HB 66: Creates an income tax credit for those who make contributions to scholarships for students at private K-12 schools.
  • HB 96 and HB 101: Imposes a sales tax holiday.
  • HB 97: Excludes the delivery charges for direct mail from the sales tax.
  • HB 113: Creates a tax credit for “angel investors,” who are individuals that invest in early-stage businesses.
  • HB 136: Exempts bees and beekeeping supplies and equipment from the sales tax.
  • HB 150: Allows a tax deduction for health care providers for the costs of providing charitable care services (health care to uninsured persons who do not pay).
  • HB 162: Makes it voluntary for corporations to file consolidated tax returns (consolidation is a strategy to decrease tax avoidance).
  • HB 192: Provides a tax credit for costs associated with installing insulation in houses that are near airports.
  • HB 193: Provides an income tax credit of $1,000 for each volunteer firefighter.
  • HB 205 and HB 285: Exempts purchase of equipment and supplies for the horse industry from the sales tax.
  • HB 211: Allows the homestead exemption for service-connected totally disabled veterans to be transferred to the surviving spouse upon the death of the veteran.
  • HB 212: Provides a sales tax refund of up to $3,000 for new small businesses.
  • HB 245: Provides income tax credits for those who convert vehicles to burn natural gas or who buy new vehicles that do so.
  • HB 246: Provides tax incentives for large alternative energy and renewable energy manufacturing facilities, and exempts equipment used in drilling geothermal wells from the sales tax.
  • HB 288: Exempts drugs used in treating farm animals from the sales tax.
  • HB 312: Provides a credit against income taxes for property taxes paid by distillers for distilled spirits aging in barrels if the funds are used for capital improvement projects.
  • HB 393: Exempts governmental non-profit self-insurance groups that provide insurance coverage for government employees from the insurance premium tax.
  • HB 397: Exempts manufactured homes from the sales tax.
  • HB 400: Expands a program that provided tax breaks to Ford Motor Company for reinvestment to make Toyota, GM and large auto parts suppliers eligible.
  • HB 405: Expands the number of employees for which tax credits are provided for tuition at UPS-affiliated Metropolitan College in Louisville, and removes the sunset date for the tax credit.

It is easy to find people who would support and defend any one of these proposals. And many of these bills may, in fact, be good ideas.

But the reality is that all of them cost the state money, and some of the costs are substantial. The current budget discussion in Frankfort underlines the reality that tough choices must be made about the allocation of public dollars. A tax expenditure, just like any other use of public monies, must be measured against whether it is the highest and best use of those dollars, or whether the monies would best be spent elsewhere.

Tax expenditures are an increasingly popular way to spend public dollars because there are structural biases that favor them over spending on the budget. Tax expenditures come off the top, before monies are spent on anything else. Tax expenditures exist in perpetuity, while programs funded through the budget must receive new appropriations every two years—and in recent years have been severely cut. Also, politicians proposing tax expenditures can claim to be cutting taxes while at the same time increasing spending for a particular purpose.

Since the state loses a huge amount of revenue from tax expenditures, we need structural changes that allow us to more closely assess this spending.

One way to better address the problem would be to establish a statutory legislative committee whose responsibility is to review all state tax expenditures regularly on a rotating basis. The General Assembly already has committees that conduct program review, administrative regulation review, and oversight of capital projects and bond issues. Given that we spend roughly as much through tax expenditures as we do through the budget, it makes sense to put better systems in place to determine whether we’re getting our money’s worth.

Committee staff could analyze the effectiveness of each tax expenditure in relation to its purpose, describe who benefits, and identify the cost. A “Tax Expenditure Review Committee” could then make recommendations about whether to limit, expand, sunset, or revamp each measure, and their recommendations could feed into the biennial budget process.

Tax expenditures have become a major way that state government in Kentucky, as elsewhere, allocates resources. It only makes sense that mechanisms be put in place to evaluate what we are getting as a result.

For more on tax expenditure reform in Kentucky, see this policy brief.

 

Faster Job Growth is Encouraging, but Kentucky Still Has Long Way to Go

Job growth in Kentucky picked up in the last three months of 2011, as the state added 15,800 jobs. At the depths of the recession, Kentucky had lost 117,700 jobs. Job creation since the recovery began has reduced that gap, but the state still has 60,200 fewer jobs than before the recession hit.

In addition, the state’s real jobs deficit is even bigger once you take into account continued population growth. Kentucky needed to create an additional 57,400 jobs over the last four years to keep up with the ongoing expansion of the working age population. That makes Kentucky’s total jobs deficit 117,600 jobs—the sum of net jobs lost from the recession and jobs needed to keep up with population. See the figure below.

According to the Economic Policy Institute, Kentucky needs to average 4,500 new jobs a month for three years to return the state to pre-recession unemployment rates. While job growth averaged 5,267 jobs a month the last three months of 2011, it averaged only 2,583 jobs a month for all of 2011.

 kentucky jobs deficit

Source: Economic Policy Institute analysis of Bureau of Labor Statistics data

Beshear Names 23, Including Todd and Silberman, to Tax Reform Commission

Tax Reform Panel Named