Private Health Insurance:

Potential Tax Benefit of a Health Insurance Deduction Proposed in H.R. 2990

HEHS-00-104R: Published: Apr 21, 2000. Publicly Released: May 2, 2000.

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William J. Scanlon
(202) 512-7114


Office of Public Affairs
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Pursuant to a congressional request, GAO provided information on the potential tax benefit individuals could receive as a result of a health insurance tax deduction proposed in H.R. 2990, focusing on: (1) GAO's estimation of both the number of people who would potentially be eligible for a tax deduction under this proposal; and (2) the potential value of such a deduction.

GAO noted that: (1) had H.R. 2990 been the law in 1998, about 39 million people could potentially have benefited from the proposed tax deduction, including: (a) those who were uninsured and then decided to purchase coverage; (b) those who had individual insurance; and (c) those who had employer-sponsored insurance with no employer subsidization; (2) another 22 million potentially eligible individuals could not have benefited from the proposed deduction either because they were in the 0-percent tax bracket or because they did not file federal income taxes in 1998; (3) most of those who could have benefited from the proposed deduction--nearly 31 million--were in the 15-percent tax bracket and, at most, could have received a 15-percent reduction in premiums; (4) because the deductible portion of the premium would have been phased in over a 6-year period, the actual reduction in premiums could have been significantly lower until tax year 2007; (5) GAO could not estimate the percentage of people who might have purchased health insurance as a result of the proposed reduction; (6) individuals whose employers paid one-half or less of the total premium for their insurance could also have benefited from the deduction; (7) the number of individuals, however, is not available; and (8) an estimated 76 million people had insurance that was partially subsidized by an employer, although only a small fraction of these individuals would have been likely to benefit from the proposed deduction because most employers who sponsor health insurance pay more than half of the total premium.

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