Federal Insurance Statute would be violated. Health insurance benefits used to pay medical cost, are not taxable. There is no provision for this in State code. State would be taxing income mandated by Federal law as non-taxable. That is illegal.
Taxability is based on portion of premium paid by non-taxed earnings.
Third party coverage if fully paid by payroll deduction from taxable gross wages, is not taxable. Schedule A deduction provides for that. This is because Health Insurance proceeds used to pay medical costs are not taxable income. State does not provide this. IDOR is illegally taxing Health Insurance proceeds as income.