Health Insurance Coverage Reduces Number of People in Poverty

This post has been updated on October 23, 2017.

Health insurance coverage reduced the poverty rate by nearly one-quarter in 2014, according to a new analysis in Health Affairs that factors the premium costs and benefits of health insurance into the poverty rate. That equates to lifting more than 14.4 million people out of poverty.

The one-quarter figure represents a reduction from a poverty rate that includes health insurance costs but does not include non-cash benefits, such as health insurance benefits. Public health insurance alone — Medicaid, Medicare, and federal tax credits and cost-sharing reductions that enable eligible families to more easily afford individual marketplace coverage — is responsible for more than half of that reduction, lifting more than 8 million people out of poverty. People living in households with someone with a disability (nearly 2 million) and non-Hispanic whites (nearly 3 million) were among those receiving the most significant benefits from public insurance.

The study’s health-inclusive poverty measure is the first to account for the premium costs and benefits of insurance. The nation’s official poverty rate counts only household cash income, while the Supplemental Poverty Measure — which experts generally consider a more complete assessment of poverty status — includes non-cash resources and refundable tax credits, but does not include health costs in its measure of need or health benefits in its measure of resources.

The study’s health-inclusive measure is based on the benchmark benefit in the Affordable Care Act’s (ACA) individual coverage marketplace. The ACA plan is universally available and its cost isn’t based on health status, which allowed the study’s researchers to use it as a reasonable standard of health insurance coverage need and benefit for all people.

The study analyzed the population under age 65 in 2014, allowing its authors to evaluate the poverty-reducing benefits of health insurance coverage, including the ACA’s Medicaid expansion to low-income adults and its marketplace premium for low- and moderate-income adults and children.

The findings contribute to a growing body of research that highlights the significant short- and long-term benefits of health coverage, particularly Medicaid, for the uninsured.