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I don't get this.. even if they get a tax benefit, in net doesn't it cost money rather than save money for the company?

harryh 9y ago
Two scenarios: 1) Company pays you 100k of which you then go spend 19k in the private insurance market to buy insurance leaving you with 81k after insurance costs. 2) Company pays for your health insurance and then pays you a salary of 81k. They sound the same right? But they aren't! In #1 you will pay income tax based on a 100k salary. In #2 you will only pay income tax on 81k of salary. So you're better off in scenario #2. Given the strong employee preference for #2 most employers in competitive hiring situations will tend of offer employer sponsored health care. There are some other reasons why this happens too, but this is one of the biggest.
- zaptheimpaler 9y ago
  Ah ok, makes sense, thanks! I guess thats a less than ideal tax condition where entity X can tax write off expense E, but entity Y can't, so it makes sense for Y to pay X rather than buy directly.
- ams6110 9y ago
  Fixable by making health insurance premiums tax-deductible. Also when I was paying for an individual family plan it was nowhere near $19,000/yr. It didn't cover maternity, but that was OK because we were done having kids. But that was roughly 7 or 8 years ago.
  - hkmurakami 9y ago
    That still won't solve the discrepancy because only the top 20-30% of households itemize deductions.
    - coredog64 9y ago
      At $20K/year, I would expect a lot more households to itemize. I'm trying (and failing) to calculate off the top of my head what kind of mortgage you'd have to have for a similar deduction. But it's gotta be pretty damn big if your interest is $1600/month.
    - CoreXtreme 9y ago
      Well, if you are required to prepare your own tax returns through an accountant then he will most certainly, itemize deduction, you'll be asking him to get your tax bill down a bit. Power of incentive is nothing to be questioned.
- CoreXtreme 9y ago
  In most countries, private health insurance is tax deductible.

Two scenarios: 1) Company pays you 100k of which you then go spend 19k in the private insurance market to buy insurance leaving you with 81k after insurance costs. 2) Company pays for your health insurance and then pays you a salary of 81k. They sound the same right? But they aren't! In #1 you will pay income tax based on a 100k salary. In #2 you will only pay income tax on 81k of salary. So you're better off in scenario #2. Given the strong employee preference for #2 most employers in competitive hiring situations will tend of offer employer sponsored health care. There are some other reasons why this happens too, but this is one of the biggest.

zaptheimpaler 9y ago
Ah ok, makes sense, thanks! I guess thats a less than ideal tax condition where entity X can tax write off expense E, but entity Y can't, so it makes sense for Y to pay X rather than buy directly.
ams6110 9y ago
Fixable by making health insurance premiums tax-deductible. Also when I was paying for an individual family plan it was nowhere near $19,000/yr. It didn't cover maternity, but that was OK because we were done having kids. But that was roughly 7 or 8 years ago.
- hkmurakami 9y ago
  That still won't solve the discrepancy because only the top 20-30% of households itemize deductions.
  - coredog64 9y ago
    At $20K/year, I would expect a lot more households to itemize. I'm trying (and failing) to calculate off the top of my head what kind of mortgage you'd have to have for a similar deduction. But it's gotta be pretty damn big if your interest is $1600/month.
  - CoreXtreme 9y ago
    Well, if you are required to prepare your own tax returns through an accountant then he will most certainly, itemize deduction, you'll be asking him to get your tax bill down a bit. Power of incentive is nothing to be questioned.
CoreXtreme 9y ago
In most countries, private health insurance is tax deductible.