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  Tax Subsidies (including Tax Credits)  


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. For example, recently enacted federal health reforms incorporate (separate) premium tax credits to make coverage affordable for modest-income individuals and families and to offset employer contribution costs for small, low-wage firms.

To assist state efforts to phase-in health reform constructs such as viable small-employer Exchanges that could also stretch limited state dollars to reach uninsured workers, IHPS can identify ways to incorporate existing federal tax subsidies for employment-based coverage of uninsured small firm workers.

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 effects of various federal tax-subsidy measures and examining what actions states 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 complementary worker premium credits when small employers offer and contribute toward coverage.

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Tobacco Rating Issues and Options for California under the ACA" (IHPS, June 21, 2012). This issue brief illustrates the potential impact of the federal Affordable Care Act (ACA) provision which allows health insurers to charge up to 50% more for people who use tobacco. This premium surcharge would be paid entirely by the individual, which could mean much larger proportionate (and potentially prohibitive) cost increases for lower income individuals who receive federal premium tax credits. However, the ACA allows states to impose stricter standards for such market rules. Therefore, States could choose to disallow tobacco rating entirely or limit the tobacco-rating factor to lesser amounts. The brief identifies and assesses the implications of several alternative approaches states might adopt. Thanks to the California HealthCare Foundation for funding this analysis.

Making Coverage Affordable for Lower Income Workers While Reducing Federal Spending (August 2009; funded by the California HealthCare Foundation.) A progressive sliding-scale tax credit could help low- and modest-income workers afford health coverage available through their employers. To avoid a costly shift from employer- to government-financed coverage, House and Senate Committee-approved health reform bills deny many such workers needed assistance. Alternatives discussed here are design to provide affordable access while reducing net federal costs.

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)

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