Employers’ Subsidy

Last updated: February 21, 2019

What Does Employers’ Subsidy Mean?

Within the context of employer sponsored health insurance, an employers' subsidy is a financial benefit provided to the employee in the form of payment for all or part of the employee's health care premiums. The cost of the employee's health care coverage is subsidized by the employer.


WorkplaceTesting Explains Employers’ Subsidy

An employer's subsidy is the part of an employee's health insurance premiums that the employer pays. Employer-sponsored health care allows individual employees to take advantage of the employer's group buying power to obtain a better rate or coverage than he or she might otherwise negotiate. Almost 60% of Americans purchase health insurance through a plan sponsored by their employer. Employers may deduct the cost of providing employee health care subsidies as a business expense and employees are not required to pay income taxes on this benefit. Employers are not required to provide health care subsidies to employees, but the tax benefits of doing so make this provision common among major U.S. employers. Sponsorship of a health care plan is also a method of promoting workplace wellness and recruiting and retaining employees. Most health plans require that the employer pay at least half of the total premium costs to encourage worker participation.


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