Employer-sponsored health insurance premiums and income in U.S. tax data

Abstract

The distribution of employer-sponsored health insurance premiums in the United States is difficult to fully characterize with survey data. Using administrative tax data, we plot the population distribution of premiums and provide new evidence about the relationship between premiums and demographic characteristics, including income. The distribution of premiums measured in the tax data is comparable to survey data. People with higher incomes are more likely to have an employer-sponsored insurance (ESI) policy and, conditional on having a policy, select more expensive plans. Because higher income policyholders and their employers spend more on ESI, they also receive a disproportionate amount of government subsidies for health insurance, even when we account for non-ESI subsidies through Medicare, Medicaid, and Premium Tax Credits. Even though the distribution of health subsidies is skewed toward those with higher incomes, it is less than a quarter as unequal as the distribution of income itself.