NCPA - Brief Analysis No. For the most part, this has been a successful approach, providing coverage in 1998 to 155 million people, compared to only 15.5 million who purchase their own coverage.
People receiving employer-based health insurance enjoy an enormous tax advantage.
The value is free of all state and federal income and payroll taxes. People who buy their own insurance get no tax break unless their medical costs exceed 7.5 percent of their adjusted gross income. Even then they get only a simple deduction and must itemize on their tax return. Importantly, as the figure shows, the exclusion for employer-based insurance is extremely regressive, providing far more benefit to people of higher incomes than to people of lower incomes. With a subsidy of this magnitude, it is small wonder that employer-sponsored coverage is popular.