The report lists the major health insurance tax proposals currently under debate on Capitol Hill, and also presents survey results that indicate there is strong public support for the existing employment-based health insurance system. The dilemma, as the EBRI report points out, is that changing the federal tax treatment of employment-based health insurance in order to lower the uninsured may inadvertently cause many people with coverage to drop out. Since the existing U.S. health insurance system is voluntary, major tax changes could have far-reaching consequences for those with coverage, without necessarily reducing the uninsured. A tax credit might induce individuals to purchase health insurance on their own, or it might make it harder for vulnerable populations to continue coverage.
Health insurance is the benefit most used and valued by workers and their families, surveys show.
However, despite five years of very low health care cost increases and the recent increase in the percentage of Americans with employment-based health insurance, the uninsured population in the United States has continued to rise. These include reduced risk of adverse selection, group-purchasing efficiencies, employers acting as a workers' advocate, delivery innovation, and health care quality. The tax credit proposals for health insurance would either enhance the current employment-based health insurance system or put it at risk. One possibility is to replace the employer deduction for health insurance with an individual tax credit. Another possibility is to leave the tax exclusion unchanged for individuals who have insurance through employment and add a refundable tax credit solely for individuals who do not qualify for employment-based health insurance.