Since that agency is almost totally unionized (Except for top level staff and management) everybody knew those things already.
In any case, the reason compensation for health care is made directly by the employer is so that you avoid income taxes on that amount. Anything paid by your employer as compensation or as a benefit is accounted for by the employer as an employee expense, and that's whether you are dealing with the private sector or the government.
If folks want to pay their employees more up front, and subject them to taxes they wouldn't otherwise have to pay, I suppose they'll be willing to supplement those payments to make up for the additional tax liability on the employee, right?
Of course not ~ they won't do that. Every employer has people in personnel and accounting whose job is to nickel and dime everything to save every penny.
It is to the company's advantage to pay people such that the employee's tax liability is minimized while the utility of their compensation is maximized.
What happens to tax payers who want a greater burden of market level compensation placed on their employees is they get to pay higher taxes down the road.
They also get to shop for their own health care, which lowers costs because there would be more competition if health care was consumer-based.
Many would choose an HSA program which offers tax deferments and credits also.