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The Impact of Increased Tax Subsidies on the Insurance Coverage of Self-Employed Families: Evidence from the 1996–2004 Medical Expenditure Panel Survey

  • Thomas M. Selden

The share of health insurance premiums that self-employed workers can deduct when computing federal income taxes rose from 30 percent in 1996 to 100 percent in 2003. Data from the 1996–2004 Medical Expenditure Panel Survey are used to show that the increased tax subsidy was associated with substantial increases in private coverage among self-employed workers and their spouses. Estimated effects on public coverage and the coverage of children were smaller in magnitude and less precisely estimated. Simulation results show that much of the post-1996 subsidy increase represented an inframarginal transfer to persons who would have had held private insurance anyway. Nevertheless, increased subsidization expanded private coverage by 1.1 to 1.7 million persons, at a cost per newly insured person less than $2,300 in all simulations—a cost below that found in simulations of more broadly based subsidies.

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File URL: http://jhr.uwpress.org/cgi/reprint/44/1/115
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Article provided by University of Wisconsin Press in its journal Journal of Human Resources.

Volume (Year): 44 (2009)
Issue (Month): 1 ()
Pages:

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Handle: RePEc:uwp:jhriss:v:44:y:2009:i1:p115-139
Contact details of provider: Web page: http://jhr.uwpress.org/

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  1. Roger Feldman & Bryan Dowd & Scott Leitz & Lynn A. Blewett, 1997. "The Effect of Premiums on the Small Firm's Decision to Offer Health Insurance," Journal of Human Resources, University of Wisconsin Press, vol. 32(4), pages 635-658.
  2. Melissa A. Thomasson, 2000. "The Importance of Group Coverage: How Tax Policy Shaped U.S. Health Insurance," NBER Working Papers 7543, National Bureau of Economic Research, Inc.
  3. Royalty, Anne Beeson, 2000. "Tax preferences for fringe benefits and workers' eligibility for employer health insurance," Journal of Public Economics, Elsevier, vol. 75(2), pages 209-227, February.
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