Number: RL34767
Title: The Tax Exclusion for Employer-Provided Health Insurance: Policy Issues Regarding the Repeal Debate
Authors: Bob Lyke, Domestic Social Policy Division 
Abstract: The federal income tax exclusion - the focus of this report - is criticized for several reasons. Since it reduces the after-tax cost of insurance in ways that are not transparent, it likely results in people with insurance obtaining more coverage than they otherwise would. Not being explicitly capped or limited, it does little to restrict the generosity of the insurance or annual premium increases. These attributes contribute to what some economists argue is a welfare (or efficiency) loss from excess health insurance for those with coverage and also contribute to rising health care costs and spending. In addition, the income tax exclusion often is criticized since it gives greater tax savings to higher income individuals and families, an outcome that strikes many observers as wasteful and inequitable.
Pages: 23
Date: November 21, 2008