I can't conclusively answer more about my friend's case right now..but it should be, as you said, a pre-tax deduction..I don't know about your state but my family members used to live in TX and  LA until recently. TX has another form of Medicaid coverage for kids from families slightly ABOVE (federal ?) poverty level. Poverty level, I think is 25K gross for 3-people family. Another program is there from same agency that has nominal ($5?) co-pay for families above 25K limit but below 30 or 35K. Most states are not that supportive in this matter...hope your state also has something.