Health care insurance costs now on W-2

[imoldernu]

Form W-2 Reporting of Employer-Sponsored Health Coverage

 

[Gotadimple]

I'm slow this AM. Can you explain a little further?

My thoughts in the big scheme of things is that healthcare pre-tax just means more income tax due later. I remember when I worked that the pre-tax premium while it put more $ in my pocket initially, just meant I had to pay out more $ at tax time.

But then, I was earning enough so not paying taxes up front was necessary to cover basic expenses.

Rita

 

[Midpack]

At least at our company - the total health care costs were available - if you went looking. It was the COBRA tables, and were posted on the internal HR website.
I always looked at these during open enrollment. I was always curious about how much the megacorp was paying, and how much the employee was paying. A few years ago the ratio started shifting towards a bigger burden on the employee for family coverage. (single remained the same ratio). That shift of burden, combined with increased premiums, made for a big impact on the payroll deductions. Lots of folks didn't do the math till I pointed it out. (I'm a trouble maker.) Many switched to spouse's work coverage after doing the math.

My former employer had a target of 20% for employee contributions, though they never achieved it during the 16 years I was with them. They probably averaged about 15-18%. Very few employees knew how much HC costs really were even though we shared them several times/year ('oh, they're lying') and a significant minority thought they were paying way too much, 'shouldn't have to pay anything.' The few who had to consider COBRA on leaving were shocked, 'you're kidding, I can't afford that!' Ah, I miss the good old days...

 

[ducky911]

so I guess this dd box is for information only and it does not add in anywhere?

makes me wonder why they are doing this....first step in changing it to add in as income?


from reading all the posts makes you wonder how unfair it seems with the big difference in the amounts and the fact that some of us that have to pay with after tax dollars.


Bob

 

[audreyh1]

My thoughts in the big scheme of things is that healthcare pre-tax just means more income tax due later. I remember when I worked that the pre-tax premium while it put more $ in my pocket initially, just meant I had to pay out more $ at tax time.

But then, I was earning enough so not paying taxes up front was necessary to cover basic expenses.

Rita

Well it doesn't work out that way for health care insurance which is an expense, not a tax-deferred savings with some future tax ramifications. It's simply a major tax break for those with employer-provided health insurance.

If what you're saying is that the employer is getting a better deal through their group rate - well, that just adds insult to injury, as the individual often has to pay a higher individual rate AND with after tax dollars.

 

[Midpack]

Even without knowing policy specifics, at least it appears we're all in the same ballpark. Excluding the one post identified as single:

$17,214
$13,000
$12,683
$16,176
$12,144
$16,641

I do read posts here from time to time with people buying private insurance at much lower rates, though I can only assume the coverage and/or deductibles are different.

 

[jon-nyc]

I have a crazy crazy cadillac plan - it was over 38k for a family of 3.

 

[vttlarry]

here is a twist: my wife worked half the year but is covered on my plan, so nothing listed for health care on her W2. I am retired with a pension and full health care, but nothing listed on the 1099R I received.

 

[travelover]

Well it doesn't work out that way for health care insurance which is an expense, not a tax-deferred savings with some future tax ramifications. It's simply a major tax break for those with employer-provided health insurance.

Thanks. This is the way I understand it, too. Add in that someone paying their own health care insurance is more likely to be a low paid worker than someone getting employer supplied health care, and it does seem regressive.

 

[skyvue]

I am single with a HSA plan. My DD amount was only $4,050 for the year. I would have guessed my plan cost my employeer much more than that. They do contribute $500 to my HSA per year which I believe is in that number.

My employee contribution was only $540 for the year ($20.77 per paycheck). Seems like I am getting a bargain compared to most? I did have out of pocket expenses for medical of $700 last year though. It was higher than normal due to a severe sprained ankle that required some x-rays, boot and several office visits.

My long-term disability insurance I purchase via payroll deduction is actually more than my health care.

 

[ziggy29]

Thanks. This is the way I understand it, too. Add in that someone paying their own health care insurance is more likely to be a low paid worker than someone getting employer supplied health care, and it does seem regressive.

Especially when you work at a crummy job for someone else with no health insurance. The self-employed can generally deduct the premiums they pay, but those who are employed but buy their own health insurance (or those who are retired) can not.

 

[meierlde]

So, would I be correct in saying that if your employer provides you with health care, it is tax free to you, but if you have to purchase your own health care, you pay for it with after tax money?

If true, that would seem kind of regressive.

Now if your employer offers a Benefit Cost reduction plan you can pay your share pre-tax. If you are paying after tax dollars if the total of all medical payments exceeds 10% then you can deduct the amount above 10% for 2013

 

[TrvlBug]

Ours is $19, 087 for DH and myself. We pay $3,600 for our 20% of the medical plan through payroll ded as well as approx. $3K out of pocket each year. Interestingly, my retiree bens once DH retires would cost me $7.5K/yr for medical plan only (no dental & vision and whatever else is included in the $9.5K pp on our 12DD).

 

[ERhoosier]

Sounds like a potential build-up for when and if they decide to start taxing it...

+1.
Just like muni bond interest reporting has lead to more & more of that being functionally taxed (e.g. non-AMT bonds, MAGI for ACA subsidies, etc.).

 

[ziggy29]

+1.
Just like muni bond interest reporting has lead to more & more of that being functionally taxed (e.g. non-AMT bonds, MAGI for ACA subsidies, etc.).

Or included as "imputed income" for potential future means testing for various entitlements? All conjecture, but it feels like we may be headed down that road, especially if you are under about 50-55 years old. There is plenty they *could* do with it, but right now it's only going to be used starting in 2018 to determine what is a "Cadillac" health plan.

 

[jclarksnakes]

Here is another twist. I am retired military and DW is a teacher. DW has no health insurance coverage at her work because we instead use Tricare Prime. My retirement income is reported on a 1099R I got a couple days ago which has no entry for health insurance cost. On DW's W2 her block 12 DD value is reported as $4587. If reporting this number is so important to somebody in the governement why is it not reported on retired military 1099s? Also the value reported on DW's W2 is wrong. Will there be any repercussions for employers who report an incorrect number?

 

[bondi688]

Sounds like a potential build-up for when and if they decide to start taxing it...

That has been discussed frequently enough by the politicians and likely will happen in the near enough future. Why else would they put that on the W-2 form?

 

[Rustward]

Here is another twist. I am retired military and DW is a teacher. DW has no health insurance coverage at her work because we instead use Tricare Prime. My retirement income is reported on a 1099R I got a couple days ago which has no entry for health insurance cost. On DW's W2 her block 12 DD value is reported as $4587. If reporting this number is so important to somebody in the governement why is it not reported on retired military 1099s? Also the value reported on DW's W2 is wrong. Will there be any repercussions for employers who report an incorrect number?

If that happened to me I would ask the employer for an explanation.

 

[ziggy29]

Here is another twist. I am retired military and DW is a teacher. DW has no health insurance coverage at her work because we instead use Tricare Prime. My retirement income is reported on a 1099R I got a couple days ago which has no entry for health insurance cost. On DW's W2 her block 12 DD value is reported as $4587. If reporting this number is so important to somebody in the governement why is it not reported on retired military 1099s? Also the value reported on DW's W2 is wrong. Will there be any repercussions for employers who report an incorrect number?

It only applies to current employees with employer health insurance who are normally issued a W-2. It doesn't apply to the self-employed or to retirees:

Employer-Provided Health Coverage Informational Reporting Requirements: Questions and Answers

Q10. Will employers now be required to issue a Form W-2 to retirees or other former employees to whom the employer would not otherwise issue a Form W-2?

A. No.

 

[Independent]

Just looked at my W2 and it says $12,683.47 in that box. But what do I do with this info? Is it useful?

Probably not to people who post here. Most of us are going to carefully research individual health insurance costs before we decide to ER.

IMO, we're kind of unusual. Lot's of people may think about retiring at 62 or even earlier and have some vague idea that they'll have to do something about health insurance, but never do any serious research. This is an annual reminder of how expensive it really is.

Another thought - almost all economists (plus some non-economists like me) think that the employer cost of health insurance comes out of the employees paycheck. There is some hope that employees will see the size of this number and be more supportive of ideas that might keep the cost down.

And, of course, there is the tax issue ...

 

[Independent]

So, would I be correct in saying that if your employer provides you with health care, it is tax free to you, but if you have to purchase your own health care, you pay for it with after tax money?

If true, that would seem kind of regressive.

I'll agree that it's bad public policy.

For personal financial planning, note that if you itemize you can deduct any medical expenses about 7.5% of your AGI. "Medical expenses" includes dental, vision, deductibles, copays, even mileage. When I was w**king, we never came close to the 7.5%. After I retired and we were buying high-risk individual insurance, we blew right through that number. I kept track of everything.

Thinking about a family of four with an $80k AGI and no employer subsidized health insurance, they can deduct all expenses over $6,000. They may come close to the $6,000 with dental, vision, etc. and end up deducting a good deal of their major medical premium.

 

[samclem]

Yes, it's a good step toward letting people know how much their "free" employer-provided health insurance costs. I'd even favor more info, perhaps easily available on a web site, showing other appropriate info (average costs for private policies for someone of the same age, average employer costs for employer-provided policies in your area, etc). Any common-sense steps that can be taken to help folks see and appreciate the costs of this health care/insurance would be useful.

 

[Mulligan]

We just got DW's W-2 yesterday and I noticed same, didn't know what it was at first. I knew exactly what HC cost/employee at my former employer was (with and without empl contributions), but she'd never heard estimates at her .org employer. Her DD was $16,641! She also contributed $4160 medical & $153 dental, though NOT over and above DD I assume? Plus out-of-pocket!!!

I also got an online estimate (using a link an ER member provided yesterday) of what we'll spend for HC once ACA is fully enacted, and the estimate was $18,864/yr. We only spend about $41K/yr on all other expenses, there is something wrong when two healthy adults have to cough up $19K for health care - 32% of expenses. I was hopefully estimating $12K/yr even though I knew I was kidding myself.

"We" can't get to addressing the cost, and rate of increase, of HC in this country (relative to the rest of the world) too soon for my tastes...[/rant]

Some of these estimated quotes just seem outrageous. I checked in my area and I can't believe it would be that high, compared to what I am currently paying on my own individual plan. Maybe they are overestimating the eventual cost. Hopefully, my grandfathered plan will hold for a while. I will be honest. If I get thrown on the exchange somehow, and had to pay what you are reading, I will seriously consider paying the fine and getting it when the occasion arises. I have been healthy my whole life and will assume that to be the case going forward. I will continue to check BP, cholesterol , and such and pay for physicals with cash. If a problem occurs, I'll buy later. I am not going to simply give $10,000 a way every year. I could probably pay cash for a heart attack treatment every 5 years and still come out a head. End of my rant

 

[samclem]

In other interesting developments regarding employer health costs:

Many unions are lobbying for changes to PPACA which would allow some of their members, who are covered by Union insurance plans or employer/union plans, to receive health insurance subsidies from the government. As the law is now written, the subsidies go only to lower-income individuals who don't have insurance provided by their employer. From this article:

Union leaders say many of the law's requirements will drive up the costs for their health-care plans and make unionized workers less competitive. Among other things, the law eliminates the caps on medical benefits and prescription drugs used as cost-containment measures in many health-care plans. It also allows children to stay on their parents' plans until they turn 26.
To offset that, the nation's largest labor groups want their lower-paid members to be able to get federal insurance subsidies while remaining on their plans. In the law, these subsidies were designed only for low-income workers without employer coverage as a way to help them buy private insurance.

I think many corporations may have made the same arguments about PPACA and competitiveness issues in the distant past.

Oh, and another development yesterday on employer-provided heath care and family members:

Federal tax subsidies under the 2010 health law designed to help lower-income Americans afford insurance won't extend to dependents who can be covered through a family member's employer.


The decision, announced by the Obama administration on Wednesday, means some low-income Americans whose employer-plan premiums are beyond their means won't be eligible for the main perk of the law. Several provisions are behind the wrinkle.


Under the law, large employers have to provide coverage for their workers and subsidize it so that premiums don't come to more than 9.5% of an employee's wages. Otherwise, they face a fine. The administration determined last year that employers had to offer coverage to a worker's dependent children but wouldn't have to subsidize their inclusion in a plan. Employers aren't required to cover a worker's spouse.


Many lower-income Americans who don't have access to affordable insurance will be eligible for federal tax subsidies toward the cost of premiums beginning next year. But the rules released Wednesday confirm that that benefit won't extend to dependents who can be covered through a family member's employer, even if the cost of that plan puts it beyond the family's means.

But, the silver lining . . .

The administration said in a separate rule Wednesday that people in such situations would be among several groups who don't have to pay penalties for not carrying insurance coverage.

So, dependents of covered workers have to be covered, but they can be made to pay "full freight" (no subsidy from the employer). And no subsidy from the taxpayer, either. But, zero penalty for waiting until a major health crisis develops to buy insurance.


I'm a little surprised that the executive branch is making these major determinations in the benefits provided by this law, I would have thought such specifics would be included in the legislation itself. I wonder how the CBO was able to provide a cost estimate with so much uncharted territory. And that Kaiser Family Foundation calculator we all used--I wonder if these assumptions were included in their computations? It might be worth re-checking there after they have time to incorporate the "new truth."

 

[Animorph]

Some of these estimated quotes just seem outrageous. I checked in my area and I can't believe it would be that high, compared to what I am currently paying on my own individual plan. Maybe they are overestimating the eventual cost. Hopefully, my grandfathered plan will hold for a while. I will be honest. If I get thrown on the exchange somehow, and had to pay what you are reading, I will seriously consider paying the fine and getting it when the occasion arises. I have been healthy my whole life and will assume that to be the case going forward. I will continue to check BP, cholesterol , and such and pay for physicals with cash. If a problem occurs, I'll buy later. I am not going to simply give $10,000 a way every year. I could probably pay cash for a heart attack treatment every 5 years and still come out a head. End of my rant

The difference is that you had to qualify with no pre-existing conditions for your individual insurance. Employer plans take all employees, all ages and conditions.