Tax Subsidies for Employer-Sponsored Health Insurance: Updated Microsimulation Estimates and Sensitivity to Alternative Incidence Assumptions
ABSTRACT OBJECTIVE: To estimate 2012 tax expenditures for employer-sponsored insurance (ESI) in the United States and to explore the sensitivity of estimates to assumptions regarding the incidence of employer premium contributions. DATA SOURCES: Nationally representative Medical Expenditure Panel Survey data from the 2005-2007 Household Component (MEPS-HC) and the 2009-2010 Insurance Component (MEPS IC). STUDY DESIGN: We use MEPS HC workers to construct synthetic workforces for MEPS IC establishments, applying the workers' marginal tax rates to the establishments' insurance premiums to compute the tax subsidy, in aggregate and by establishment characteristics. Simulation enables us to examine the sensitivity of ESI tax subsidy estimates to a range of scenarios for the within-firm incidence of employer premium contributions when workers have heterogeneous health risks and make heterogeneous plan choices. PRINCIPAL FINDINGS: We simulate the total ESI tax subsidy for all active, civilian U.S. workers to be $257.4 billion in 2012. In the private sector, the subsidy disproportionately flows to workers in large establishments and establishments with predominantly high wage or full-time workforces. The estimates are remarkably robust to alternative incidence assumptions. CONCLUSIONS: The aggregate value of the ESI tax subsidy and its distribution across firms can be reliably estimated using simplified incidence assumptions.
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ABSTRACT: To assess the degree to which premium reductions will increase the participation in employer-sponsored health plans by low-income workers who are employed in small businesses. Sample of workers in small business (25 or fewer employees) in seven metropolitan areas. The data were gathered as part of the Small Business Benefits Survey, a telephone survey of small business conducted between October 1992 and February 1993. Probit regressions were used to estimate the demand for health insurance coverage by low-income workers. Predictions based on these findings were made to assess the extent to which premium reductions might increase coverage rates. Workers included in the sample were selected, at random, from a randomly generated set of firms drawn from Dun and Bradstreet's DMI (Dun's Market Inclusion). The response rate was 81 percent. Participation in employer-sponsored plans is high when coverage is offered. However, even when coverage is offered to employees who have no other source of insurance, participation is not universal. Although premium reductions will increase participation in employer-sponsored plans, even large subsidies will not induce all workers to participate in employer-sponsored plans. For workers eligible to participate, subsidies as high as 75 percent of premiums are estimated to increase participation rates from 89.0 percent to 92.6 percent. For workers in firms that do not sponsor plans, similar subsidies are projected to achieve only modest increases in coverage above that which would be observed if the workers had access to plans at unsubsidized, group market rates. Policies that rely on voluntary purchase of coverage to reduce the number of uninsured will have only modest success.Health Services Research 11/1997; 32(4):453-70. · 2.49 Impact Factor
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ABSTRACT: I consider the labor-market effects of mandates which raise the costs of employing a demographically identifiable group. The efficiency of these policies will be largely dependent on the extent to which their costs are shifted to group-specific wages. I study several state and federal mandates which stipulated that childbirth be covered comprehensively in health insurance plans, raising the relative cost of insuring women of childbearing age. I find substantial shifting of the costs of these mandates to the wages of the targeted group. Correspondingly, I find little effect on total labor input for that group.American Economic Review 07/1994; 84(3):622-41. · 2.69 Impact Factor
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ABSTRACT: Studying worker health insurance choices is usually limited by the absence of price data for workers who decline their employer's offer. This paper uses a new Medical Expenditure Panel Survey file which links household and employer survey respondents, supplying data for both employer insurance takers and declines. We test for whether out-of-pocket or total premium better explains worker behavior, estimate price elasticities with observed prices and with imputed prices, and test for worker sorting among jobs with and without health insurance. We find that out-of-pocket price dominates, that there is some upward bias from estimating elasticities with imputed premiums rather than observed premiums, and that workers do sort among jobs but this does not affect elasticity estimates appreciably. Like earlier studies with less representative worker samples, we find worker price elasticity of demand to be quite low. This suggests that any premium subsidies must be large to elicit much change in worker take-up behavior.International Journal of Health Care Finance and Economics 08/2001; 1(3-4):305-25. DOI:10.1023/A:1013771719760 · 0.49 Impact Factor