Tax Credits for Individual Health Insurance

Effects on Employer Coverage and Refinements to Improve Overall Coverage Rates

Tax credits, like those proposed by the Bush Administration, could help make individual health insurance affordable for the many uninsured people who do not have access to employment-based health coverage. However, some policy-makers believe that tax credits that would be available only for nonemployer coverage could cause an increasing number of people who now have employment-based coverage to become uninsured. This would principally be the result of some employers choosing to reduce their existing contributions or drop coverage because most of their workers could instead receive the tax credit. Where employers did so, the net out-of-pocket price that a number of workers would face for health insurance would be higher, causing fewer of them to obtain coverage.