A little known provision in Obamacare is causing some eyes to bug out -- literally:
As workers open their W-2 forms this month, many will see a new box with information on the total cost of employer-sponsored health insurance coverage. To some, it will be a surprise, perhaps even a shock.
Workers often have little idea how much they and their employers are paying for coverage. In many cases, economists say, workers give up cash compensation to get and keep health benefits.
The disclosures, required by the 2010 health care law, are meant to make workers more cost-conscious. Health benefits are still tax-free. But labor unions and employer groups say it could be easier to tax them in the future, now that employers must report their value to the government.
The new information appears in Box 12 of the standard W-2 form, with a two-letter code, DD. The box shows the "cost of employer-sponsored health coverage." And that amount is not taxable, the Internal Revenue Service says on the back of the form.
How much are we talking?
Jay J. Makled, a union steward for the United Automobile Workers at the Ford plant in Dearborn, Mich., described his reaction after seeing that his health coverage cost nearly $16,000 last year: "It's quite expensive. I was surprised to see how much the company was paying for that benefit."
$16,000 a year in health care - paid by Ford without him even knowing it. All tax free. Imagine, though, if it were an after-tax amount? He'd have to make an extra $25,000 just to pay that $16,000 health care bill.
And folks don't think our system is broken? Thank god the new law busts into the open this elephant that's been walking around all these years.
The facts as they exist:
"People are often shocked when they see the cost, $12,000 to $16,000 a year," Ms. Huberfeld said. "Many Americans believe this is something they get free. But employers pay lower wages because they provide insurance."
Congress acted after Peter R. Orszag, then the director of the Congressional Budget Office, told lawmakers: "The economic evidence is overwhelming, the theory is overwhelming, that when your firm pays for your health insurance, you actually pay through reduced take-home pay. The firm is not giving that to you for free."
Yup - many Americans have no idea how much this stuff costs. Those who pay for their own insurance have known about this all along. Why should those who work for big corporations be immune to this dirty little secret?
The best part about this?
"Health coverage is a big piece of people's income and a large part of the social welfare budget," said C. Eugene Steuerle, a tax economist at the Urban Institute. "But the benefits are not taxable, and most of the spending is hidden, so we don't consider the trade-offs. If we want to get control of health care costs, people have to be aware of them."
That is the goal of the disclosure requirement, which was proposed by a bipartisan group of senators: two Republicans, Charles E. Grassley of Iowa and Michael B. Enzi of Wyoming, and two Democrats, Max Baucus of Montana and Ron Wyden of Oregon.
And the worst part of this?
The tax-free treatment of employer-provided health benefits is the largest tax break in the tax code, costing the government roughly $180 billion a year in lost revenue, or 80 percent more than the home mortgage interest deduction, according to the administration.
How about that? A $180 billion subsidy from taxpayers to employees of big corporations. What about all the self-employed workers out here?
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