Almost universally disliked by economists, and just as adored by working Americans, employer-sponsored health insurance is the largest federal health care benefit by participation and third largest by spending. According to a study funded by the Robert Wood Johnson Foundation, 159 million Americans purchase health insurance coverage through their employer with pre-tax income in 2011.[1] This preferential tax treatment, which originated as a by-product of World War II era regulations, allows working individuals and families to receive a discount on their health insurance premiums roughly equal to their marginal tax rate—not entirely dissimilar to the newly implemented Health Insurance Marketplace subsidies. The forgone tax revenue represents a sizeable cost to the federal government, $248 billion in 2013, and one that rivals spending on other major federal health care programs.[2]

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[1] State-Level Trends In Employer-Sponsored Insurance Coverage: A State-by-State Analysis, Robert Wood Johnson Foundation, April 2013, available at: http://www.rwjf.org/content/dam/farm/reports/reports/2013/rwjf405434

[2] The Distribution of Major Tax Expenditures in the Individual Income Tax System, Congressional Budget Office, May 2013, available at: http://www.cbo.gov/sites/default/files/cbofiles/attachments/43768_DistributionTaxExpenditures.pdf ; The Budget and Economic Outlook: 2014 to 2024, Congressional Budget Office, February 2014, available at: http://www.cbo.gov/sites/default/files/cbofiles/attachments/45010-Outlook2014_Feb.pdf