Why No Tax Break for Privately-purchased Insurance?

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Why No Tax Break for Privately-purchased Insurance?

Monday, November 26th, 2007 | Health Care |

During World War II, employers started giving workers health benefits to get around wartime wage controls. Since then, the government has continued to give a tax break for employer-provided health insurance; it isn’t taxed, the way wages are.

That’s how we ended up with the health-insurance system we have now, based on employers. You get a tax break if you get your insurance through your job. If you get a raise and use it to buy your own insurance instead, you have to pay taxes on that money. (Ditto if you use your raise to pay doctors directly.) Almost everyone takes the tax break. The market for insurance bought by individuals is, as a result, small and stunted, which is all the more reason to stay in the employer system.

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In his State of the Union Address this year, President Bush proposed letting people who buy insurance for themselves qualify for the break too. The Congressional Budget Office estimates that his plan would help 7 million people who don’t have insurance get it. But its main point is to offer individuals more control over their health care–to make it possible, for example, for them to keep their policies when they switch jobs.

Makes sense to me.

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