Why does the IRS not want businesses to subsidize their employees’ individual health plans with pre-tax earnings? This seems to not make sense, as it is completely fine for an individual to deduct premiums from their earnings, as long as it’s for an individual plan. So:
I buy my own insurance using money that I will deduct from my taxes: Okay.
I buy my own insurance using pre-tax earnings from my company: Not okay.
What’s the difference?
Here is the IRS’s formal answer to this question. In essence, when an employer pays for health insurance with pre-tax dollars, it falls under the rules for group health insurance. The Affordable Care Act has a set of rules for group plans, including how much an employee can be required to pay for his/her single coverage, how long the waiting period can be and so forth. RS’s formal answer