Question

Among the benefits offered by corporations, at least in the United States, is health insurance. One explanation for why corporations offer such insurance is that this benefit is tax favored: Companies can compensate employees with health-insurance benefits that are treated as nontaxable income. Also, health care providers and insurers (such as Blue Shield) have historically offered better rates to employers for their employees than to individuals who ask for the same coverage. Why is this?

Answer 1

Generally, candidates look for more than just salaries when assessing potential employers. They take into account the whole compensation package, including additional benefits and perks. In order to attract and retain highly talented workers, employers provide add-on benefits to employees. Some of the benefits are taxable and some are tax-free. Employers provide health insurance benefits to their employees which is tax favored because it will encourage employees to stay in the same company for a long period of time. Also the employers want to be competitive in the market place by attracting and retaining talented executives.

Health care providers and insurers have provided better rates to employers for their employees than to individuals who ask for the same coverage. This is because, today's market is very competitive, in order to sustain in the market everybody needs to provide some benefits to others. If the particular health care providers and insurers do not provide better rates then some other will provide better rates to employers. As a result, competitors of insurers and health care providers will gain the business. Another reason is, insurers are providing insurance coverage to many employees at the same time, so naturally the rate will be better for the employers as bulk amount cost less. Whereas,individuals who ask for the same coverage need to pay more because they are asking for one coverage at a time.