Health insurance as employee compensation

By Jack Hoffman

Employer-sponsored health insurance is a misnomer. Money that an employer putatively “contributes” to a company health insurance plan is simply employee compensation in another form. The point is driven home in a recent column in the American Prospect by Paul Waldman about the U.S. Supreme Court decision in the Hobby Lobby case.

Understanding that health insurance is part of an employee’s compensation package will be critical as Vermont moves forward with Green Mountain Care — now under the umbrella of Obamacare or later as a publicly funded, universal health care system.

Obamacare provides tax credits for many families and individuals that purchase health insurance on their own. A question for a lot of businesses and their employees is whether the overall cost and quality of health insurance would be better with a company plan or by dropping the company plan to allow individual employees to purchase insurance on their own and claim the tax credits.

While there are other tax consequences of making this change that complicate this decision, what shouldn’t be in doubt is that employers who drop the company insurance plan need to adjust their employees’ compensation accordingly. As Waldman reminds everyone in his American Prospect article:

“Your employer is basically acting as an administrative middleman between you and the insurance company. Your employer isn’t the one whose money is paying the premiums, you are. It’s compensation for the work you’ve done, just as much as your salary is.”

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Jack Hoffman is a senior policy analyst at the Public Assets Institute, a Montpelier based policy non-profit.