Tax Deductibility of a Group Health Insurance - Article Example

Principal findings: tax deductibility of employees encourages overspending on insurance thus benefiting wealthy taxpayers with high marginal tax. A broader level of health insurance creates social value leading to the formation and maintenance of a risk pool for the employed (Pauly, 1989). In addition, this tax regime disrupts the efficiency of market labor and reduces the efficiency of health insurance, and the provision of health care services.

Conclusion: changing the tax exclusion is critical in increasing retention although this also reduces job mobility and discrimination of employees prone to health complications. Employers will avoid employing employees with a high health cost. Moreover, high insurance coverage makes the insured negligent of their health concerns. This tax exclusion increases lost revenue hence the need to eliminate the tax exclusion, limit the tax exclusion, and replace the tax regime with tax rebates.

Counter arguments: Tax deductibility increases the distribution of insurance coverage to all regardless of income and social status (Pauly, 1989). This tax regime promoted the health of Americans by reducing the cost of healthcare services, and reducing health insurance premiums, and tax burden to the insured. Moreover, this provides flexibility in the health insurance system, increases innovation in the delivery of healthcare, and encourages the equitable distribution of resources.