The tax laws effectively force workers to accept coverage from their employers. The current tax system excludes from taxable income (federal and state income tax, and payroll taxes) all compensation provided in the form of employer-sponsored insurance.Lawmakers looking into solutions in lessening the number of uninsured are looking at tax credits to provide effective health insurance to the uninsured. Government intervention and assistance will be required in order to meet the goal to provide health insurance to the low-income workers and their dependents.The federal tax code is a logical but not obvious vehicle for expanding health coverage. Washington already subsidizes coverage for most Americans, by exempting from taxes (both income and payroll) the insurance premiums that an employer pays on employees’ behalf. As a result, job-based insurance is typically 30 percent to 50 percent cheaper than buying coverage individually. Yet few people are aware of this tax exclusion because they do not have to report it as an itemized deduction when they file their taxes.
Tax credits, although modest, will allow people to avail of health insurance coverage that is both comprehensive and affordable. Tax credits can purchase benefits relevant to a population both geographically and demographically. Continuous development of tax credits and reevaluation of current insurance regulations is one key way to help expand health insurance coverage to a large number of uninsured.