Do corporations make money off employer-based healthcare plans?

[kentuck]

I saw a couple of numbers from the "deficit" plan this morning that showed the employer-based healthcare costs taxpayers about $280 billion dollars and the mortgage interest costs taxpayers about half of that? Is that true? Is that why they don't want healthcare reform? Because they are making tons of money off it? And as an added bonus, they have their employees by the balls because they are tied to their healthplans. Is that what is happening?

[Gin]

1. I was laid off 2 years ago and got COBRA for dental & vision

when I worked, the dental was 3or4$ more a month than what COBRA charged me and cobra is 102% of cost....so..the corp. (EDS)made money on the dental for sure....times many employees every month..it all adds up.

That actually surprised me that they would make money off premiums...but they did.

[Igel]

2. Tax breaks don't equal income.

The mortgage deduction reduces taxes owed, but it's not a dollar-for-dollar swap. That, of course, would be breaking even and not making money.

Let's say you have an employee. You pay Fred his salary. You don't pay income taxes on that salary--he does. You pay payroll and unemployment taxes on it. Otherwise his salary is a tax write-off for you.

Now let's say you pay part of Fred's health insurance. You pay $1500 a month. You don't pay income taxes on the amount you pay for his health insurance. You don't pay payroll taxes on it. It's a tax write-off for you. But he doesn't get a deduction for the $500/month health insurance premium he pays. Payroll, income, and unemployment taxes are paid on that amount.

Now, let's say that you have money to give Fred a $250/month salary increase this year. On the other hand, his insurance is going up so he'll have to pay $750/month. You look, and think, "Gee, if I give him the $250, he'll pay income tax on it and payroll tax on it. I'll pay payroll and unemployment tax on it. I give him $250 more but after taxes it won't cover the $250/month insurance increase. But if I don't give him a salary increase and instead pay the insurance increase it *will* cover it. And I won't pay payroll taxes on it."

So you pay for more health care. Of course, the government doesn't pay for any of this. It simply doesn't collect as much money as it could, were the laws different. It could say that health benefits are taxable so that the amount paid by employers is taxable--income for the employee, both employee/employer payroll tax, and unemployment tax.

Note that during the * years the average salary was flat or even decreased slightly. On the other hand, total compensation increased quite a bit. There's no contradiction in this: Employers got more bang for their buck by increasing health insurance payments instead of giving out cash to their employees. This year my wife's paycheck flatlined--no salary increase. On the other hand, her employer covered more of the health insurance premium. In other words, she got a non-taxable raise that was at least 15% bigger than the cash amount she would have gotten otherwise.

[kentuck]

3. I'm sure you are correct...

But, I must admit, there is a cognitive dissonance after watching the discussion (I would not call it a debate) between Rachel and Jon...