A broad range of federal and state proposals incorporate some form of tax subsidies to make health insurance more affordable for modest and low-income populations. To assist state and local initiatives under current federal policy, IHPS has identified ways to incorporate existing federal tax subsidies for employment-based coverage of uninsured small firm workers.

Tax subsidies can be used towards coverage of modest-income workers and their families who are uninsured, because they are self-employed or their employers do not offer them coverage or because worker contributions are too high. A variety of new tax subsidies have been proposed that are expressly designed to reach previously uninsured small firms. These proposals range from tax credits or deductions for individual purchase of non-employment-based health insurance to tax credits for small businesses to encourage them to offer coverage.

Tax credits are included in most coverage proposals as a way to subsidize health insurance for target groups. But their workability may vary across populations with differing characteristics. And changing the structure of tax incentives for health insurance could have important effects, both positive and negative, on where and how people are covered.

In a number of reports (listed below), IHPS has analyzed the potential effects of alternative tax-subsidy proposals and has explored how they might best be implemented. We are prepared to assist in analyzing the potential market effects of various federal tax-subsidy proposals and examining what actions they can take to assure that the tax credits reach as many uninsured people as possible. For example, the range of possible state actions could include: establishing insurance market rules for policies sold to tax-credit users; setting up purchasing pools for tax-credit users; and strong incenting or requiring individuals to have coverage. Issues of coordination with employer coverage, Medicaid and SCHIP will also be important to consider.

Three Options for Insuring all Californians (California HealthCare Foundation, October, 2006)

Massachusetts-Style Coverage Expansion: What Would It Cost in California? (California HealthCare Foundation, April 2006)

Policy Brief on Tax Credits for the Uninsured and Maternity Care (IHPS, for March of Dimes, January 2004)

Applying Large-Scale Subsidies for Low-Income Populations to Health Insurance Coverage through Small Firms (IHPS, May 2003)

Individual Tax Credits and Employer Coverage: Assessing and Reducing the Downside Risks (IHPS, August 2002)

Tax Credits for Individual Health Insurance: Effects on Employer Coverage and Refinements to Improve Overall Coverage Rates (IHPS, July 2002)

Private Purchasing Pools to Harness Individual Tax Credits for Consumers (Inquiry, Summer 2001)

Public Subsidies for Required Employee Contributions Toward Employer-Sponsored Insurance (The Commonwealth Fund, December 2000)

Treatment of Flexible Benefit Plans under Employer Coverage Subsidy Program (IHPS, November 1998)

Making Medical Savings Accounts Work in Conjunction with Insurance Market Reform (IHPS, for American College of Physicians, April 1995

Will Subsidies Meant for Health Services Go to Excess Insurance System Overhead? (IHPS, July 1994)