| In many solely owned businesses, that is Schedule C filers, the individual may claim an above-the-line deduction deduction on his Individual Tax Form 1040 for the insurance premiums paid. In other words, this deduction is taken his personal tax return.
In contrast, if the business is operating as an S corporation, there is a slightly different tax consequence if the individual who is the sole shareholder and sole employee, purchases the health insurance in his or her own name.
The IRS specifically states that, "the health insurance premiums paid by the S corporation would be deductible by the S corporation as compensation to the 2% shareholder. The health insurance premiums paid by the S corporation for the 2% shareholder should be included in the 2% shareholder’s W-2".
Thus, it would appear that for the premium to be deductible, the IRS wants this amount to be reported as W-2 wages to the receipient shareholder. | 
