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You really should read through the way IRS treats payments from health insurance programs as well as premiums paid for them. It's quite enlightening.

I have. I'm a health insurance broker. I'm familiar with Federal as it applies to my business as well as the 43 states we do business in. Of the 7 we don't, NJ is one of them. It's just business.

OK, now, think about why states get away with protecting their employees from federal income tax liability when they buy them high priced medical insurance plans.

IRS rules clearly provide that BENEFITS received are taxable as income unless the employee pays for the premium, so I'm going to assume there are a set of arcane rules that determine the break points where IRS automatically deems the premium to have been paid by the employees.

So maybe you can enlighten us on these matters.

I'd years ago figured out that state employee salary and benefit schedules were so divergent from jobs in the private sector for some taxable reason ~ and with competition being among states for this class of employee, they should all be doing something similar. So here we find the states all doing the same thing, and it's even different from the federal government ~ (which I know all about having dealt with that system for decades).