Taxing employer-provided health insurance would (among other good things) reduce healthcare costs and create a pool of money to fund subsidies, in the form of refundable tax credits, available to low-income Americans for the purchase of health insurance. Deregulating the individual market for health insurance — allowing insurance companies to offer plans that cover only catastrophic medical events, not routine medical care — would make insurance more affordable and expand consumer choice. Funding high-risk pools would provide access to medical care for people with pre-existing medical conditions who might otherwise struggle to get insured in a deregulated market.

Under this framework, there would be a strong incentive to purchase health insurance even without the ACA’s individual mandate: Catastrophic coverage would be less expensive, both to the government and to the consumer, than comprehensive coverage. A sufficiently generous tax credit would provide added motivation, as only those who actually purchased insurance would be able to claim it.