The Importance of Group Coverage: How Tax Policy Shaped U.S. Health Insurance

Melissa Thomasson ()

No 7543, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In 1954, the Internal Revenue Service stipulated that employer contributions to the health insurance plans of their employees were to be excluded from employee taxable income. Today, the tax subsidy is major feature of the U.S. health care market. This paper examines the initial effects of the tax subsidy on the demand for health insurance using previously unexamined data from 1953 and 1958. Results suggest that the tax subsidy increased the growth of group insurance, particularly among union members and employed persons. This is a critical effect because group insurance is not only less expensive than individual insurance, but it is also easier to obtain, and households with access to group health insurance are far more likely to purchase health insurance coverage than those without similar access. By increasing access to group insurance, the tax subsidy fostered an increase in the purchase of group health insurance by people who may not have purchased individual coverage, and generated institutional change as it cemented an employment-based system of group health insurance in the United States.

JEL-codes: H20 I10 (search for similar items in EconPapers)
Date: 2000-02
New Economics Papers: this item is included in nep-hea, nep-ias, nep-pbe and nep-pub
Note: DAE EH PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Published as "From Sickness To Health: The Twentieth-Century Development Of U.S. Health Insurance," Explorations in Economic History, Vol. 39, no. 3 (July 2002): 233-253
Published as American Economic Review, Vol. 93, no. 4 (September 2003): 1373-1384

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Journal Article: The Importance of Group Coverage: How Tax Policy Shaped U.S. Health Insurance (2003)
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