This article has been updated for the 2022 & 2023 tax years. 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 income amount.
What is Included in the W2 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
- Domestic partner coverage included in gross income
The following are required if your employer charges a COBRA premium and optional if they do not charge a COBRA premium:
- Employee Assistance Plan (EAP) providing applicable employer-sponsored healthcare coverage
- On-site medical clinics providing applicable employer-sponsored healthcare coverage
- Wellness programs providing applicable employer-sponsored healthcare coverage
The following are optional to be reported:
- Dental or vision plan not integrated into another medical or health plan
- Dental or vision plan which gives the choice of declining or electing and paying an additional premium
- Health Reimbursement Arrangement (HRA) contributions
- Self-funded plans not subject to Federal COBRA
Items that are not reported include:
- Health Savings Arrangement (HSA) contributions (employer or employee) – those can be found in Box 12, Code W
- Archer Medical Savings Account (Archer MSA) contributions (employer or employee)
- Health Flexible Spending Arrangement (FSA) funded solely by salary-reduction amounts
On to the important stuff – what does this $ amount mean?
Are you & your Employer Paying Too Much for Health Insurance?
I 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, or high deductible health plan! It’s supposed to be a cheaper health insurance option because of the high deductible. 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.
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?