No More Secrets: What Your Health Insurance Really Costs

health careDid you just receive your W-2 form from your employer? Take a peek. It’s your chance to get an inside look at what your health insurance really costs. The truth might come as a shock.

While these figures might have been hush-hush a few years ago, changes in the law now require that they be posted in plain sight on your W-2 form. This reporting requirement was introduced by the 2010 Affordable Care Act.

What to look for

In box 12 of your W-2, look for a number with the code “DD.” That number reports how much your workplace health insurance cost in 2013. (If there is no code “DD,” you probably are not enrolled in a health insurance plan through your workplace).

What it all means

These benefits are reported to the IRS on your W-2, but they are not taxable to you, nor are they included in your reported income.

According to IRS guidance, the amount reported should include both the portion paid by the employer and the portion paid by the employee through premiums. Of course, what you pay in other out-of-pocket costs is not known to the employer and not reported on the W-2.

Costs vary widely across employers and individuals, depending on the type of coverage.   For one of our clients, the total health care cost on his W-2 was less than $2,000. For another, costs topped an amazing $20,000 per year.

Why the change?

Why the change in how costs are reported? The IRS says the new system “will provide employees useful and comparable consumer information on the cost of their health care coverage,” perhaps to help them make better choices. (Of course, critics speculate that this is all a plot bringing us one step closer to taxing health care benefits).

Another advantage? One health care organization says it “gives employers an opportunity to disclose how much value their employees receive in benefits.”

“Workers often have little idea how much they and their employers are paying for coverage,” writes the New York Times.

The final word?

“If we want to get control of health care costs, people have to be aware of them,” says C. Eugene Steuerle, a tax economist at the Urban Institute, in an interview with the New York Times.






About Mari Adam

Mari Adam, Certified Financial Planner™ has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!


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