Volume 48 | Number 2pt2 | April 2013

Abstract List

G. Edward Miller Ph.D., Thomas M. Selden


To estimate 2012 tax expenditures for employer‐sponsored insurance () in the nited tates and to explore the sensitivity of estimates to assumptions regarding the incidence of employer premium contributions.

Data Sources

Nationally representative edical xpenditure anel urvey data from the 2005–2007 Household Component (‐) and the 2009–2010 Insurance Component ().

Study Design

We use workers to construct synthetic workforces for establishments, applying the workers' marginal tax rates to the establishments' insurance premiums to compute the tax subsidy, in aggregate and by establishment characteristics. Simulation enables us to examine the sensitivity of tax subsidy estimates to a range of scenarios for the within‐firm incidence of employer premium contributions when workers have heterogeneous health risks and make heterogeneous plan choices.

Principal Findings

We simulate the total tax subsidy for all active, civilian U.S. workers to be $257.4 billion in 2012. In the private sector, the subsidy disproportionately flows to workers in large establishments and establishments with predominantly high wage or full‐time workforces. The estimates are remarkably robust to alternative incidence assumptions.


The aggregate value of the tax subsidy and its distribution across firms can be reliably estimated using simplified incidence assumptions.