More permanent stuff at

12 June 2008

No Win

Our small company was acquired last year. With a slew of other changes came the health plan of our new parent company. All told, my health care expenses were slated to go up by $1,000 per month, or $12,000 per year.

We figured we could do better on our own. We quickly found decent family coverage that costs us about $650 per month, or $7,800 per year.

At first it may seem like that means an extra $4,200 of my earnings that I am able to keep each year. But here is the kicker: contributions to my employee-sponsored health plan are tax-exempt. Contributions to my privately funded health plan are taxed. The tax difference was substantial, roughly $350 per month, or $4,200 a year*.

So the bottom line is that be waiving my employee-sponsored health plan and going with something private and cheaper, the government gets to stick it to me so that the whole thing is a wash.

When exploring options, we looked into the idea of getting medical coverage, the premiums of which would be tax free. But the government only lets us do that on very high deductible plans. The trade off here is that the monthly premiums are very inexpensive, but the coverage is less comprehensive, requiring the insured to cough up a larger chunk of medical expenses. It didn't seem like a good way to go since the tax savings would have been minimal due to the inexpensive premiums.

Obviously, the high deductible plan looks more attractive now. I'm going to have to do more research now that I have hard numbers to compare with.

Oh, and I'm going to write my congress-people asking them why this situation exists. I should still get the same tax benefits from my private insurance that I get when participating in my employee-sponsored insurance plan. It seems that things are stacked in favor of either the employer or the insurance providers. I have a hard time seeing who benefits by my lack of choice when it comes to employer-sponsored health care--there is only one plan to choose from and it is expensive. Regardless of that, the system is obviously not created with me, the insured, in mind.

*To be sure, I'll be getting some of that $350 per month back. After deductions, etc., our taxes ended up being roughly 10% of our income last year.