What would happen to the demand for employer provided health insurance?

Question

In 1986, the U.S. federal income tax system changed marginal tax rates so that the top marginal rate fell from 50% to 33.3%. Given the way fringe benefits are negotiated, what is expected to happen to the demand for employer provided health insurance?

Answer 1

"Given the way fringe benefits are negotiated" . .  they aren't.  Either an employer offers them, to retain skilled employees, or they don't - when they don't have particularly skilled employees.

I don't see a change happening.

Answer 2

Given the assumption that your total compensation is a finite amount and you have to choose fringe benefits and salary within that limit the reduction in the federal income tax would cause a decrease in demand for employer provided health insurance. That's not to say that employees would not want health insurance but because of reduced taxation your income would be greater and the tax benefit of your fringe benefit would be reduced. Therefore one would lean toward greater take home pay.