12/16/2019

Reforming Government Subsidies to Private Health Insurance

"Health benefits received from an employer are not currently treated as taxable income by the US government. As a result, Americans with employment-based insurance enjoy coverage that is more generous (e.g., through lower deductibles and copayments) than it would otherwise be. This, in turn, leads to higher overall healthcare spending as people overconsume low-value medical care owing to overly generous health plans.

Changing how the government subsidizes private health insurance could induce employers to switch to health plans that better satisfy the needs of their employees. Bradley Herring and Erin Trish examine the impact of such a change in “Quantifying Overinsurance Tied to the Tax Exclusion for Employment-Based Health Insurance and Its Variation by Health Status.”"