Why Not Extend Health Benefits to Illegal Immigrants?

By Megan McArdle

In this week's Newsweek, Andrew Romano suggests that we should be eager to extend the boon of health insurance to illegal immigrants, because they're young and healthy, and will lower the average cost of the pool.

Here's the problem:  illegal immigrants don't have any money.  Not all illegal immigrants, of course.  But as a group, they're really, really poor.  According to Pew, almost 60% of illegals lack health insurance.  A third of their children, and 21% of the adults, live in poverty.  Also, "the median annual household income of unauthorized immigrants was $36,000, compared with $50,000 for people born in the United States. These differences in household income are particularly notable because the unauthorized immigrant households have more workers per household on average (1.75) than U.S.-born households (1.23)." 

Romano, like many commentators, seems to be confusing average with total cost.  Yes, adding illegal immigrants to the pool will probably lower the average cost, because they are younger than the average American.  But that only lowers the average cost.  It still costs you extra money to care for each undocumented worker.  Pooling only works if the younger, healthier members bring in more money in premiums than they cost in benefits.  And the illegal immigrants really don't have a lot of money to shell out in premiums.

So no, this is not all that likely to be a net fiscal benefit.  It might be a good way to make hiring illegals unattractive, as Romano suggests--except that there are, apparently, many employers in America willing to take the highly illegal step of paying undocumented workers off the books.  Adding a requirement that they pay imaginary health insurance on top of the imaginary taxes and imaginary minimum wage they are paying now will probably not much faze them.

This article available online at:

http://www.theatlantic.com/business/archive/2009/09/why-not-extend-health-benefits-to-illegal-immigrants/26522/