The only way those state payments for medical insurance is subject to tax is if they pass the money through the employee's hands first ~ RIGHT?! if they were to just give the employees a raise sufficient to pay for their medical insurance directly, the employees would find a TAX INCREASE at the highest rate on that very same money that had earlier been used, tax free, to pay for their medical insurance.
BTW, I looked for the EXEMPTION for medical insurance, but the IRS site seems to have been "rewritten" ~ did Obamakkkare change some of this?
No, if the employees contribution is increased, it's still in Sec. 125 so the employees taxable income goes down so they actually might pay a little less in their taxes. So theoretically the state will loose whatever percentage (it will be a miniscule amount comparitively) of the taxes they receive back from the wages they just paid them. But the benefit to the state is an actual reduction of 1 to 1 for every dollar they cut for premiums and the employee picks up.
See it all started when state employees made crap salaries so the states enticed applicants with good benefits. The problems only came when their wages started getting better and better and the benefits kept getting better and more expensive at the same time. Now Gov't jobs are the "good" crappy jobs to get compared to the rest of us schlubs who just get to pay for it with our regular crappy jobs.