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.
Many people argue that employer coverage has other natural advantages as well.
However, these supposed advantages are often myths, or at best overstated. Very few employers are big enough to manage risk without purchasing reinsurance. Also, workers in a single company tend to be more like one another than like the general population. For one thing, they are able to work. For another, they tend to be from a single geographic area.