Your Health Benefits Pay Dividends

Workplace Health Insurance Is More Valuable Than Cash

Employer-provided health benefits are far more valuable than you may think.

Your health insurance plays a big role in keeping you well, and may even save your life. It also provides you a generous tax break and gives you some protection against bankruptcy. That’s not all: Those health benefits are worth nearly twice as much than if your company gave you the cash instead.

Some people take for granted their work-based health insurance, and resent being asked to pay more for it each year. That’s understandable. The average family’s annual premium rose 113 percent from 2001 to 2011, while inflation grew 27 percent, reflecting the steep increase in healthcare costs. Nobody wants to swallow that.

The costs: U.S. employers that provided health insurance to workers in 2011 paid an average of $10,944 for family coverage per worker. The typical company also required employees to pay $4,129 in premiums, or 27 percent of total costs.

The benefits: Your health insurance opens doors to doctors, hospitals and other care providers when you need it. And, a closer look reveals that your employer-sponsored health insurance is a hot commodity. Consider the advantages:

Protection against financial catastrophe: Medical bills are the single biggest reason Americans file for bankruptcy. Employer-sponsored health coverage is among the broadest available, standing as a stopgap between you and financial ruin should you face a series of serious medical bills.
Increased buying power: You get stronger buying power via your employer, as large employers can demand substantial premium discounts on your behalf better than you can do on your own.
Generous tax breaks: You pay for your employer-sponsored health insurance with pre-tax dollars—meaning the money is not counted toward your tax obligation. That makes the coverage more affordable than if you bought it using after-tax dollars.
More valuable than cash: If your company simply gave you the cash value of the health coverage it provides, only a little more than half of it would end up in your pocket, thanks to income and payroll taxes.
Added bonus: Employer-offered coverage is often better—covering more doctors’ visits and requiring lower out-of-pocket obligations—than health insurance you could buy yourself. Because the cost of more generous coverage is reflected in the premium price, you also get a generous tax benefit for much of the medical care you receive. Individuals who buy health insurance on their own have to pay for their medical care with after-tax dollars.

The best part of health insurance is the direct benefit to your health. People with health insurance enjoy better health and live longer than those without it. Lack of insurance is associated with delaying treatment and dying prematurely. According to a Harvard University study, 45,000 people die from lack of health insurance every year.

Employers understand the value in health benefits and almost all large U.S. employers offer benefits to attract and keep good workers. [Read HK's "Firms Give Cash for Healthy Habits"]. Companies know health insurance helps keep their workers more productive. A Commonwealth Fund study reveals that health problems in working-age Americans and their families cost $260 billion in lost productivity each year.

But employers are having a hard time keeping up with rising healthcare costs. That’s why workers are picking up more of the tab by paying a larger portion of the premium and higher out-of-pocket costs. Companies also are asking you to comparison shop and take better care of your health. [Read HK's "Save Money on Healthcare Costs," "Keep the Pounds Off" and "Let's Get Physical!"]

In order to get the best value from your health benefits, it’s important to understand the value that employer-provided health insurance provides your family. So, take the information your boss gives you, and read up on it. The money you save may be your own!