Section 106 – American Healthcare Chronicles

I recently started building products focused on healthcare affordability in the US. As I was ramping up on a new space, the biggest question that sparked my curiosity was: how did we get here? This question is the inspiration for this weekly series chronicling the decisions, accidents, and breakthroughs that built the US healthcare system. By 1954, employer-sponsored health insurance had been growing for over a decade. But it was built on uncertain legal ground — a patchwork of wartime exemptions, IRS rulings, and informal practice. One adverse ruling could have unraveled the whole thing. Then Congress passed sweeping tax reform bill with one buried provision. Section 106 of the Internal Revenue Code of 1954 was simple and deliberate: employer contributions to employee health plans were excluded from the employee’s taxable income entirely. Employers kept their deduction. Employees paid no tax on the benefit. Both sides of the transaction now had a powerful financial incentive to…