Since the passage of the Affordable Care Act, it is mandatory for all employers with more than 50 full-time workers to provide health insurance to their full-time employees; employers that don’t provide insurance have to pay a fine. The government has in effect washed its hands of the responsibility of providing health insurance to workers, and instead forces employers to manage this growing cost.

Premiums depress wages

Formally, employers pay about 70 percent of insurance premiums and workers the remaining 30 percent. But in practice, workers are paying the whole thing. The costs might seem invisible to workers, but in fact their health benefits are reducing their take-home pay every week. Why? Because for an employer, what matters is the total cost of employing someone. This cost includes salary but also benefits such as health insurance. If an employer believes your work is worth $50,000 to the company but has to pay $13,000 for your health care, your salary is going to be no more than $37,000.

They also reduce wages in a particularly unfair way: Because health insurance premiums are fixed, the wage penalty is the same for a low-wage secretary as it is for a highly paid executive. This severely depresses wages for tens of millions of moderate-income workers. When you hear that average hourly earnings of (nonsupervisory) American workers have stagnated since the late 1970s in spite of a growing economy, keep in mind that’s in part because growing health care costs are devouring an increasing share of what workers would otherwise be paid. Given the fast growth of health care costs, this situation is not sustainable.

The system is opaque enough that workers can’t see such costs clearly, but they aren’t completely hidden. Health care costs are sometimes visible on your pay slip as the “employer contribution to medical insurance.” The full cost of employer and employee premiums is also usually reported on the W-2 form that you use to file your income taxes. Take a look at box 12, code DD, and see how staggering the amounts are—typically the amount exceeds $10,000 in a year, and it can exceed $20,000 if your insurance covers family members. This is compensation for your work that you never see in your bank account, and you don’t have much choice, let alone the option to take the money as wages rather than health insurance.

Economically, insurance premiums are effectively the same as a tax on labor—a tax administered by employers. What makes this tax stand out is that it’s a so-called head tax, unrelated to ability to pay. It’s the most unfair type of tax: A huge burden for low-wage workers and almost meaningless for the rich. Head taxes (sometimes called poll taxes) used to be popular centuries ago but have long fallen out of fashion. (When Margaret Thatcher tried to impose a head tax in 1988 to replace real estate property taxes in the United Kingdom, she faced an unprecedented revolt and was ousted from office in 1990.)

No government would out-of-the-blue impose a head tax to fund health care; it would be a crushing burden on the working and middle classes. And yet in essence that’s what the U.S. government does today by mandating that employers manage a huge head tax to fund health insurance for workers.

Middle class bearing the burden

If you see the health system this way, it changes how you understand the entire U.S. tax system. Many people believe that the United States has what’s known as a progressive tax system, in which you pay more, as a fraction of your income, as you earn more. It’s true that income taxes are for the most part designed that way, but when you add all the various tax burdens together, the reality is different. And if you add mandatory private health insurance premiums to the official tax take, the U.S. tax system turns out to be highly regressive. Once private health insurance is factored in, the average tax rate rises from a bit less than 30 percent at the bottom of the income distribution, reaches close to 40 percent for the middle class, and collapses to 23 percent for billionaires.

When politicians urgently debate the tax burden on the middle class, they rarely point out that the system is already unfairly built on the backs of the middle class — and it’s our health care premiums that make it that way.