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My Employer Pays What for My Health Coverage?

February 25, 2013 - You may have noticed a new section on the W-2 form you recently received from your employer. The form includes a new Box 12, which reports the total cost of the health care provided by your employer. The added information is required by the Affordable Care Act to make workers more aware of the value of the health coverage benefits they receive as part of their jobs. The reporting obligation does not apply to employers filing fewer than 250 W-2 forms annually.

At its most basic level, the ACA seeks to extend health insurance coverage to tens of millions of Americans who currently cannot afford or, because of preexisting medical conditions, cannot obtain insurance. The devil, as they say, is in the details.

Like most workers, you probably know little about what your employer contributes toward your health coverage, even though the amounts may range as high as $16,000 a year. Nicole Huberfeld, of the University of Kentucky, recently told the New York Times that, “People are often shocked when they see the amount because they believe this is something they get for free. But, often employers pay lower wages because they provide insurance.”

While “nothing in life is free,” the new information is likely to be a surprise because, until now, the costs have been hidden. The Kaiser Family Foundation reports that premiums for employer-sponsored health insurance in 2012 averaged $5,615 a year for individuals and $15,745 for family coverage. Over five years, the costs have increased 25 percent for individual coverage and 30 percent for family coverage.

To offset the rising cost of health coverage, many employers are limiting pay raises they might otherwise pay. C. Eugene Steuerle, a tax economist at the Urban Institute, said, “If we want to get control of health care costs, people have to be aware of them.” That the reason for the disclosure requirement in the federal health care reform law. Will the disclosure make employees more conscious about how they utilize their health care services? Only time will tell.