Question
The current tax rate paid on income by employees in a company is 30 percent. The employer provides workers with a health insurance policy that
The current tax rate paid on income by employees in a company is 30 percent. The employer provides workers with a health insurance policy that is worth $3,000 per year.
a. Assuming that the company has 1,000 workers, what is the indirect government subsidy for health insurance for workers in the company?
b. Suppose that instead of providing the workers with health insurance as a fringe benefit, the employer paid each worker an additional $3,000 that they could use to purchase health insurance. If a worker wanted to buy $3,000 worth of insurance under the new arrangement, would the worker be better or worse off? Why?
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