Does Health Insurance from Work Come Out of My Paycheck?

Have you recently started a new job that offers health insurance benefits? If so, you are probably wondering how the cost of receiving those benefits is handled. Many people who are new to employer-sponsored health insurance are shocked when they receive their paycheck and find that a portion of their earnings have been taken out for insurance coverage.

In order to gain a better understanding of how your employer-sponsored health insurance benefits work, and specifically how they are paid for, continue reading to learn more.

Who Pays for Employer-Sponsored Health Insurance?

work paycheckDon’t assume that just because your employer offers health insurance benefits that they will also cover the full cost of those benefits; in fact, that is very rarely the case. While most companies will cover some of the expense, generally, they do not cover all of the cost of the benefits. The remaining portion of benefits that your employer does not cover will be your responsibility, and usually, those costs will come out of your paycheck. For instance, if the plan costs $500 monthly and your employer kicks in $300 toward the cost, you will be responsible for the remaining $200, which typically, will come out of your paycheck. In other words, your paycheck will be $200 less than what it would have been had you not signed up for coverage through your employer.

According to recent statistics, the average employee pays more than $5,000 annually for the cost of employer-sponsored health insurance for their family. For single individuals, the average employee pays around $1,200 a year. To break it down even further, the average American earns around $780 a week and contributes approximately $120 a week to cover the cost of their employer-sponsored family plans, and $25 for individual plans.

Making Up the Difference

While health insurance benefits through an employer are usually more economical than Marketplace plans, the reduction in your paycheck can really take a toll on your financial situation. Though receiving a smaller check is certainly not desirable, it’s actually better to have your premiums taken out of your paycheck. Why? – Because if you paid for those premiums out of your own pocket, the money you spend would be considered “taxable” income; but, when you elect to have your premiums taken out via your paycheck, the cost isn’t considered taxable income. In other words, when it comes time to pay your taxes, you will not owe more, but rather less; in fact, you can deduct what you’ve paid for your premiums and may even receive a refund.

How to Reduce the Amount Taken Out of Your Paycheck

Given the fact that the average worker has about $120 a week taken out of their paychecks to cover the cost of their employer-sponsored health insurance premiums, it’s easy to see how the reduction in your salary can impact your financial situation. If you are finding that the lower amount of your check simply isn’t enough to make ends meet, there are options available to you.

  • Change your plan. Speak to your employer to see if you can change your health insurance plan. Most employers offer several different options. If the plan you currently have costs more than you are comfortable spending, find out if you can switch to a more economical plan. However, if you do decide to go this route, it’s important to note that while you may be paying less for your premiums and you may be taking home more in your paychecks, you’ll probably have a higher deductible. If that’s the case, you’ll have to pay more out of your own pocket before your plan will kick in and cover the rest. In the end, the lower premiums may not be worth the higher paycheck.
  • Consider opting out. Speak to your employer and find out if you can elect to opt out of the insurance plan that they offer. Do keep in mind, though, that some employers do require you to use their insurance plan; additionally, the cost for employer-sponsored health insurance is usually considerably lower than individual policies. However, if you can opt out of employer-sponsored health insurance, there is a chance that you can secure an individual plan through the Marketplace that will cost less and may improve your financial situation.


To find out more about the most economical health insurance coverage, speak to your employer to find out what options are available to you. If you decide not to sign up under the health insurance that your employer offers, speak to a trusted agent that specializes in health insurance. Together, you will be able to find the most affordable individual health care coverage through the Marketplace.

Remember to weigh your options to determine how you can obtain the most affordable and the most comprehensive health insurance coverage possible.

Leave a Reply

Your email address will not be published. Required fields are marked *