Tax Policy:

Health Insurance Tax Credit Participation Rate Was Low

GGD-94-99: Published: May 2, 1994. Publicly Released: Jun 1, 1994.

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Pursuant to a congressional request, GAO provided information on the health insurance tax credit, focusing on how the tax credit affected low-income family participation rates.

GAO found that: (1) although it could not accurately estimate the size of the eligible population, Census Bureau and Internal Revenue Service (IRS) survey data show that about one-quarter of those individuals eligible actually claimed the health insurance credit in 1991; (2) health insurance subsidy participation rates may have remained low because IRS and other public assistance groups did not adequately promote the health insurance subsidy or the credit was not sufficient to encourage program participation; (3) low-income families with incomes above $10,000 were more likely to purchase the health insurance credit; (4) the health insurance credit reimbursed only a small percentage of taxpayers' reported health care costs; (5) in 1991, the maximum health insurance credit available was $428 and the average health insurance credit paid was $233; and (6) individuals and employers were not very responsive to health insurance subsidies.

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