This report from the Robert Wood Johnson Foundation examines the employer-sponsored private health insurance industry and how the current structure affects higher and lower-income workers and their health insurance policies.

From report:

Policy-makers are considering modifications to the tax treatment of employer-sponsored insurers (ESI) as a way to raise revenue to help pay for health reform and provide incentives to reduce health care costs. Understanding how current subsidies work is important to assessing health reform proposals. This brief is an update of a previous synthesis report published in 2003, and presents essential information about the structure and distribution of existing tax subsidies for ESI and the implications for policy options.

Key Findings:

• Federal tax subsidies for employer sponsored insurance will amount to more than $240 billion in 2010.
• Higher-income workers benefit the most from the current tax subsidies.
• Lower-income families pay the largest percent of income on insurance, but receive the smallest tax subsidy.

Policy-makers may want to think about ways to level the playing field including: Eliminating the tax exclusion for ESI, capping the tax exclusion for ESI; and allowing nongroup coverage to be purchased with pre-tax dollars.

Full report: Tax Subsidies for Private Health Insurance: Who Benefits and at What Cost? (PDF | 327.5 KB)

The Robert Wood Johnson Foundation, with the Urban Institute and Synthesis Project. (2009). Tax subsidies for private health insurance: who benefits and at what cost? Burman, L., Khitatrakun, S. & Goodell, S.