Internet reports have created fears that any health insurance premiums that an employer pays on behalf of an employee will be taxable income for the employee, even though no cash is received. Not so!

The health insurance reform legislation includes a new requirement, effective for 2011 and after, that an employee's Form W-2 (Statement of Wages) must include information about the expenditure that an employer makes for the employee's health insurance. That amount, however, will NOT be included in gross income. The information about health insurance will be treated in a manner that is similar to current law treatment for life insurance premiums that an employer pays on behalf of an employee. For decades the law has required that employers provide information on the W-2 about life insurance premiums. The lilfe insurance premium amount is included in income (and taxed) ONLY when employees earn more than $50,000.

The new health insurance reporting format will be similar to the life insurance reporting, EXCEPT that no amount of the health insurance premium will be included in the worker's income. The health insurance premium amount will remain untaxed, as it is under current law.

Congress added this reporting provision to health care reform at the insistence of Chairman Baucus. The intent is that this information will begin an education process so that employees can see just how valuable employer-paid insurance is. It 's worth noting that excluding health insurance premiums from taxation (even though the insurance is a very valuable asset) is the largest single tax expenditure (MID is #3 — 20 years ago it was #1, but has slipped as low as #4, and is currently #3.)