Section 125 Plans: Policy Implications for States
A growing number of states are expressing interest in reducing the number of uninsured workers and making their health coverage more affordable by requiring or encouraging employers to set up Section 125 plans—also referred to as “cafeteria plans.” These plans refer to Section 125 of the U.S. Internal Revenue Code, which establishes rules related to taxable and non-taxable benefits offered by employers. Section 125 plans reduce the effective cost of health care coverage for many employees (depending on their total income and family situation) by allowing them to purchase coverage on a pre-tax basis. This administrative mechanism reduces both employees’ and employers’ share of Medicare and Social Security taxes, as well as employee income taxes and employer unemployment payments.
Continue reading on: Overview of State Approaches to Section 125 Policies Designed to Expand Coverage
See This Year's Analysis
Read this year's analysis in the following articles:
- State and National Health Care Reform: A Case for Federalism
- Lessons Learned from State Reform Efforts