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Home » Health, Health Insurance, Taxes, Workplace Finance

Are You and Your Employer Paying Too Much for Health Insurance? Here’s How to Find Out

Last updated by on 13 Comments

Want to know what your employer is paying for your health insurance and find out if they (and consequently you) are paying too much?

Just check out your W2, box 12, code DD. I’ll show you what to do with it in a bit…

If you have signed up for your employer’s sponsored health insurance plan, you will see a dollar amount listed next to the “DD” code.

The DD code reporting is a requirement of the Affordable Care Act and first started being reported in 2012. Note that this code is for reporting purposes only. It is not a taxable amount.

What is included in the DD code total?

The DD code is not only what your employer payed for your health insurance plan, but it includes your share (your premium payments) as well, as the IRS points out.

The total listed could also include the required reporting of applicable:

  • Health FSA values for the plan year in excess of employee’s cafeteria plan salary reductions for all qualified benefits
  • hospital indemnity paid through pre-tax deduction

and optional reporting of:

  • the coverage for a dental or vision plan
  • Health Reimbursement Arrangement (HRA) contributions

Some surprising items that are not reported include:

  • Health Savings Arrangement (HSA) contributions (employer or employee)
  • Archer Medical Savings Account (Archer MSA) contributions (employer or employee)

On to the important stuff – what does this $ amount mean?

Are you & your Employer Paying Too Much for Health Insurance?

w2 box 12 code dd health insurance costsI was very surprised to find that the total listed for box 12, code DD on my W2 was $11,880.17!

Now, this is for a high deductible health plan (HDHP), where my cut is only $936 in annual premiums. There were no FSA contributions or hospital indemnity deductions. I can’t say for sure whether my dental and vision plans were included, but if so, I would expect that to be a minor addition.

So really, what’s left is just under $900 per month or $11,000 annually, for my wife and I for combined premiums.

Why do I find this so shocking?

It’s an HDHP! When I researched pricing on the new healthcare.gov plans for 2014 (which you should also do to compare), I found a better plan than my own (Blue Cross Select Silver) to only cost $455/month, or $5,460/annually. Less than half!

What makes this more surprising is that I work for a very large (meaning big pool of employees) and well-run corporation. One would think negotiated rates would actually be lower than what could be found through the public insurance exchanges.

Not so.

What’s concerning about this is that if my employer ever decided that it needed to start shifting more premium expenses to employees because the cost was too high, it’s more cost out of my pocket. That and… shoot, if they were paying less on health care, maybe they could pay more in income. They are clearly paying too much for health insurance, and as a result, I am too.

If my well run employer is having this issue, I am willing to bet many of yours are too – which means higher premiums and less pay for you.

The major benefit of employer sponsored health insurance plans (outside of the premium sharing) was that they did not discriminate for pre-existing conditions. But now with the ACA, no insurance plans can.

I’m really curious to see what price differences everyone else is seeing between what your employer is paying for health insurance and what you could buy on your own through the exchanges. Is your employer paying too much for your health insurance?

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13 Comments »
  • Matt T says:

    My employer only reports HSA account contributions on my W2 in box 12 with code W. There is nothing listed in 12 with the code DD.

  • David says:

    My employer reported $8,600 on my W2 and I have a good plan with a $450 individual deductible (900 family) and a $1600 max out of pocket ($3200 family). So, almost 12,000 seems extremely high for a high deductible health plan.

    It is nice to be able to see the total cost of insurance to know what is being paid, but the next question is what can you really do about it? If it is just information to let you know your employer (and you) are paying too much for your insurance, then that really doesn’t do any good. If you can use that information to help your employer get lower costs and therefore maybe help yourself get more pay, then it seems useful.

    • G.E. Miller says:

      I think there’s a few benefits that can be gained from the reporting:
      1. you can compare what your employer is paying vs what you are paying to know if you are getting a good deal on your particular policy (and if your employer offers multiple policies, potentially switch).
      2. transparency could lead to employer’s and insurers addressing high cost plans, especially when public costs are so easily available now.
      3. you can see and compare what your employer (and you) are paying vs. what is available on the private market – which is great information to have for a number of reasons (COBRA considerations, self-employment considerations, etc.).
      4. It allows you to see the value of your benefits, which is useful when trying to decide between you or a spouses employer plan.

  • Daniel says:

    It appears that the two premiums mentioned in the post are not apples to apples for several reasons.

    For example, I suspect that the pricing of insurance premiums for your employer is based on the demographics and claims history of all employees in your specific company. Most likely the premiums are blended for all ages (not split into age bands).

    It appears to me that the premiums on the healthcare.gov website are split into age bands with younger individuals paying a lot less that older individuals.

    Basing premiums on age banding helps younger employees to save money today while basing premiums and blending costs for employees of all ages helps older employees pay lower premiums.

    • G.E. Miller says:

      There may be some truth to this, but I am fairly certain the average age of employees at my company is right around my age, if not younger.

      And yes, older age will result in a higher premium, but it’s probably not as significant as you were expecting. For example, a 55 year old male (much higher than the ave. employee age) would be at $414/mo. through the better exchange plan.

  • Michael says:

    I have 12a and 12b, totaling a bit over $11,000.
    D = 6375
    DD = 4845

    Company size is around 200. We got whacked last renewal because the insurance company actually lost money on the last term.

  • Ron Ablang says:

    OK, so I work for a local gov’t w/ 11,000+ employees. I also have the HDHP w/ HSA that I contribute the max to. Here’s my numbers:

    12a DD = $14424.96
    12b G = $1340.00
    12c W = $6314.94

    So what can I learn from this?

  • Steve B says:

    Company size in US is about 200k. Block DD is $13,317. Monthly premium for family coverage is about $130 with $2500 deductible. I haven’t had to check Healthcare.gov …. yet.

  • RS says:

    HDHP for two in their early 30s, 2.5k deductible, 8.5k out of pocket max.
    DD: 11.9k

    I was shocked too and looked for a comparable in my state. I wasn’t able to find one with a 2.5k deductible, everything was higher than that.

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