“Few people know the total cost of their health benefits or realize that family coverage can account for a fourth or more of their total compensation.
For the first time, that cost is listed on their W-2 tax forms this year — provided you know where to look.
The Affordable Care Act included a provision that requires employers with 250 or more employees to list the cost of their health insurance on the forms.
The goal was to help make people more aware of health care costs, and this year’s W-2 forms will do that if you know what the letters “DD” in box 12D mean.
“That ain’t going to grab my attention,” said Roger Feldman, a health economist at the University of Minnesota.
Still, Feldman and many other economists support the idea.
“People don’t understand the cost of health care and what the employer is paying,” he said.
The premium cost can vary significantly from employer to employer. Nationally, premiums for single coverage averaged $5,615 and for family coverage averaged $15,745 last year, according to the Kaiser Family Foundation and the Health Research & Educational Trust, an affiliate of the American Hospital Association.
The cost of family coverage worked out to about 30% of the estimated median household income of about $51,000 last year.
Most people have a rough idea of what they pay for their portion of premium, but that is just a fraction of total cost.
Employers on average pay 82% of the cost for single coverage and 72% for family coverage, though that doesn’t include deductibles and other out-of-pocket expenses.
The number on the W-2 lists the total cost of coverage — not the share paid by the employer. To get that figure, you have to find a year-end pay stub and subtract your share of the premium.
The odds probably are against most people doing that.
Some people believe that the portion of the premium paid by their employer doesn’t cost them anything. But almost all economists agree that workers over the long term bear the cost of their health benefits in the form of lower wages.
Few employers have used the new requirement to educate workers about the cost of their health benefits, said Dave Osterndorf, chief actuary of Towers Watson, a benefits consulting company. He also doesn’t expect many people to take note of the figure on their W-2 forms.
“I don’t think it will have a major impact — unless something else evolves from it,” he said.
Listing the figure on the W-2 has raised speculation that it eventually could lead to taxing health benefits.
“As soon as you put it on the W2, you raise that issue,” Osterndorf said.
There are no plans for that now. But the numbers could get a lot more attention by 2018, when a tax will be placed on high-cost health plans.
Beginning that year, a 40% tax will be placed on the value of a health plan that costs more than $10,200 for single or $27,500 for family.
The so-called Cadillac tax will encourage higher deductibles — which studies suggest can help control health care costs at least on the margins.
Paul Fronstin, a senior research associate for the Employee Benefit Research Institute, said that employers already are taking steps to avoid the tax.
“They don’t want to impose drastic changes at the last minute,” he said.
The tax also would come as a shock to employees.
The W-2 forms now can tell people if their health plan is on track to hit the threshold for the tax. That is, if you know which box to look for on your W2.
“It is kind of buried,” Fronstin said.”