Selden, Thomas M. 2009. “The Impact of Increased Tax Subsidies on the Insurance Coverage of Self-Employed Families: Evidence from the 1996-2004 Medical Expenditure Panel Survey.” Journal of Human Resources 44(1): 115–139.
The share of health insurance premiums that self-employed workers can deduct when computing federal income taxes rose from 30 percent in 1996 to 100 percent in 2003. Data from the 1996-2004 Medical Expenditure Panel Survey are used to show that the increased tax subsidy was associated with substantial increases in private coverage among self-employed workers and their spouses. Estimated effects on public coverage and the coverage of children were smaller in magnitude and less precisely estimated. Simulation results show that much of the post-1996 subsidy increase represented an inframarginal transfer to persons who would have had held private insurance anyway. Nevertheless, increased subsidization expanded private coverage by 1.1 to 1.7 million persons, at a cost per newly insured person less than $2,300 in all simulations—a cost below that found in simulations of more broadly based subsidies.
Thomas M. Selden is an economist at the Agency for Healthcare Research and Quality. The author has benefited from the helpful comments of Jessica Banthin, Joel Cohen, Steven Cohen, Partha Deb, Tim Dowd, Jonathan Gruber, James Poterba, and two anonymous referees. He takes responsibility for all remaining errors. The paper represents the views of the author, and no official endorsement by the Agency for Healthcare Research and Quality or the Department of Health and Human Services is intended or should be inferred. The data used in this article can be obtained beginning March 2010 through February 2013. Due to the confidential nature of the data, they are solely for use within MEPS Data Centers. Contact the author regarding application details at the Division of Modeling and Simulation, Center for Financing, Access and Cost Trends, Agency for Healthcare Research and Quality, 540 Gaither Road, Rockville, Maryland 20850, PH: 301-427-1677, tselden@ahrq.gov.