Private Health Insurance:

Estimates of Effects of Health Insurance Tax Credits and Deductions as Proposed in H.R. 2261

HEHS-99-188R: Published: Sep 13, 1999. Publicly Released: Sep 27, 1999.

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William J. Scanlon
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Pursuant to a congressional request, GAO provided information on the health insurance tax credit proposed in H.R. 2261 for individuals who purchased private health insurance, focusing on both the number of people who would potentially be eligible for a tax credit or deduction under this proposal and the potential value of these credits and deductions.

GAO noted that: (1) if H.R. 2261 had been the law in 1997, the following outcomes would have been likely; (2) up to 28 million nonelderly Americans would potentially have been eligible for the tax credit proposed under H.R. 2261; about 21.8 million of these individuals were uninsured and could have received the credit only if they had purchased insurance in the individual market; (3) another 27.3 million uninsured and individually insured people would have been ineligible for the proposed credit because they did not file a tax return, their income was too high, or they had insufficient tax liability; (4) nearly 11 million of the 28 million people could have been eligible for a full credit that would have reduced the net cost of their health insurance by as much as 60 percent; (5) because the bill caps the credit amount at $1,200 for individuals and $2,400 for families, the credit would have been less than 60 percent of the premium for individuals buying health insurance with premiums exceeding $2,000 and for families with premiums over $4,000; (6) about 17 million of the 28 million people would have been eligible for a partial credit; (7) of these individuals, about 15 million had less tax liability than the amount of a full credit of $1,200 or $2,400, and 2 million had adjusted gross income that was too high for a full credit; (8) the same 28 million people and another 12 million who were either uninsured, had individual insurance, or had employer-sponsored insurance with no employer subsidization could potentially have been eligible for the proposed tax deduction; (9) individuals whose employers paid one-half less of the total premium could have benefited from the deduction; (10) the number of such individuals, however, is not available; and (11) an estimated 74 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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