Two Federally Subsidized Health Insurance Programs are One Too Many: Reconsidering the Federal Income Tax Exclusion for Employer-Provided Health Insurance in Light of the Patient Protection and Affordable Care Act

Section 106 of the Internal Revenue Code (I.R.C.) provides a federal income tax exclusion for the value of employer-provided health insurance. This decades-old provision was enacted for the primary purpose of increasing the incidence of health insurance in the United States. Since its adoption, scholars have advanced a number of additional policy considerations in support of preserving this exclusion. The enactment of the Patient Protection and Affordable Care Act (ACA), however, will result in a significant overhaul of the American health care system. As a result, a reexamination of I.R.C. § 106 is warranted. This Note argues that the ACA has rendered each of the policy considerations in support of I.R.C. § 106 largely irrelevant, inapplicable, or generally less compelling—whereas the arguments in favor of repeal now seem all the more convincing. Nevertheless, policymakers should stop short of outright repeal because of a number of drawbacks that may prove unavoidable. Consequently, this Note proposes a middle ground that instead calls for significant reform. Converting the exclusion into a progressive, refundable tax credit would largely accomplish the goals sought by repeal, while still avoiding the negative repercussions that total repeal may engender.