HOW ARE NET HEALTH-INSURANCE BENEFITS DISTRIBUTED IN THE EMPLOYMENT-RELATED INSURANCE MARKET

The recent health care reform debate has questioned whether the health insurance market effectively pools risks and transfers income across states of health. We use data from the 1987 National Medical Expenditu re Survey to examine how net health insurance benefits are distributed in the employment-related insurance market. We find this market to tr ansfer income from those in good health to those with health problems and the tax subsidy from employer health insurance contributions to be a crucial determinant of the net benefit distribution, To the extent society views these transfers as meritorious, our findings suggest cau tion regarding initiatives to limit or eliminate the tax subsidy.