I always like to look at the 12-DD box on my W-2.
friendly reminder: 100% of the employer sponsored market is subsidized, and has mostly higher premiums https://t.co/eQ4MgLdMFX
— Seth Trueger (@MDaware) September 6, 2016
This box tells me how much my employer sponsored insurance (ESI) actually costs between premiums and Health Savings Account (HSA) contributions. The 12-DD box was a requirement of PPACA and its goal is to make people slightly more aware that their health insurance at work really costs them more than $47.56 every two weeks.
My employer is starting the annual open enrollment education process. We’ll get weekly e-mails from Human Resources about all of the different options and how the networks interact. There are no major changes to network or plan design for employee insurance this year. There is a small diabetes disease management program and a reference pricing experiment but for most people there will be very few visible differences between the 2016 policies and the 2017 policies. For people at my pay grade, we are seeing a 4.2% increase in premiums explicitly taken out of our paychecks. The company is “covering” roughly 85% of the cost of 85% Actuarial Value coverage for my family. Economically, the company contribution is “just” cash income transformed into a tax advantaged compensation but I don’t see the money so it does not feel like I am paying the full price of my insurance coverage for my family.
I do get two explicit subsidies. The entire premium of the policy is tax deductible. That is worth 4% of my families income. We also put away some money into a tax advantaged savings account that is worth another .5% of my family’s income for the year. So we get a total of 4.5% of family income subsidy help to pay for a good insurance package.
This is important because most poeple who get ESI don’t think they are getting subsidized. Everyone is getting subsidized. People with higher incomes and ESI get a larger dollar figure subsidy than people at a lower income because tax deductions are valued at the marginal tax rate. People with higher incomes also tend to have richer benefits, higher actuarial value coverage and fewer gatekeepers so total premiums are higher.
Medicare is heavily subsidized. Part A and Part B premiums pay for roughly a quarter of the program. The rest of society subsidizes the rest of the cost of Medicare.
CHIP has subsidies ranging from 0% to 25% to 100%.
Medicaid is almost entirely subsidized.
The individual market is heavily subsidized for people earning under 200% FPL. For people who earn between 200% and 400% FPL it is modestly subsidized. For people who earn more than 400% FPL there are no explicit subsidies like the advanced premium tax credits available between 100% FPL and 400% FPL nor any implicit subsidies through the tax code.
Let’s keep that in mind when we talk about health insurance. Almost everyone is subsidized except for a narrow segment of the PPACA individual market. It is just that some of the subsidies are well hidden and non-obvious.
Luthe
And the employer-subsidized plans can be worse than the government-subsidized ones. I’m about to switch to paying out of pocket for a 94% CSR Silver plan where my share of the premiums is $38 to a Gold plan where the employer covers 100% of the premiums. Guess which plan is, objectively, crappier.
Any advice for dropping the employer plan and trying to get them to fork over what they pay for the premiums so I can hit the individual market during open enrollment? I’m fairly sure I could do better by myself. (My other option is buying supplemental insurance to make up for the suck in the employer-sponsored plan).
Lounger
Why would this be? My employer’s workforce is ~100k, probably at least 80% have an undergrad degree or higher, almost all work at desk jobs. I would assume that these factors would make the group much less expensive than a similar-sized sample of the work-age population at large, but my premiums + employer contribution appear to be equal to or greater than the cost of a similar policy on my local exchange. Even if we conjecture that the lower and mid-level employee policies are subsidizing the executive policies, this doesn’t add up given the very low ratio of top-level management to working stiffs.
Richard Mayhew
@Lounger: The ESI market usually has these higher costs drivers: Broader networks, less restrictive authorization politicies. So that means all else being equal, higher payments per service to providers and a few more services done. The counter-driver for lower policies is less churn and a generally healthier workforce. It will depend on where you are but average ESI policies tend to be a bit more expensive then Exchange policies.
Richard Mayhew
@Luthe: Good luck with that. I don’t think you’ll be too successful as the company loses the tax advantage, you lose access to the cost sharing subsidies and the APTC because you have access to “affordable” coverage through work. I would speak with a navigator to be 100% sure but I don’t think you can do what you want to do.
artem1s
my employer has taken quite a few steps to address pay inequalities. they have enacted a few new fee structures that address the fact that even small increases in things like parking fees are far more disruptive to the lower end employees. and they are instituting a progressive fee structure rather than a flat fee. it isn’t much but it has done a lot to improve moral. Our health care fees were broken into two levels starting about 2 years ago. all the various fees together can translate to between $50-$100 a month for someone who is single and more for staff who have family members on their health care policies. there are also potential incentives with our wellness programs and I am getting a great tax advantage for my HSA. In the past, if top tier got everything covered, they didn’t care about the rest of the staff; never thought about it. Having everyone pay some portion of their premium actually brought that flat fee disparity out into the light. I don’t think my employer would be thinking about how any of these flat fees were impacting lower level staff if it hadn’t been for ACA.
gene108
Still not mandatory though. It is recommended but not an official reporting requirement.
Link