Tax credits like those proposed by the Bush Administration could help make individual health insurance affordable for many uninsured people who do not now have employment-based health coverage. Some policy makers believe, however, that tax credits that are available only for non-employer coverage could cause a number of people who now have employment-based coverage to become uninsured.

In this analysis, Rick Curtis and Ed Neuschler of the Institute for Health Policy Solutions analyze this potential problem and offer some solutions. They identify the characteristics of workers that might switch from employer-based coverage to take advantage of the tax credit and other workers that might lose coverage if they did. They also describe modest modifications in the tax credit proposals that could reduce the incentives for some employers and employees to drop coverage.