Is my employer correctly accounting for insurance premiums in my taxable income calculation for my W2?

I have always thought that my employer is calculating my taxable income incorrectly, but have never been able to find information online to verify.

Because I opt out of employer paid health insurance, I receive half of the amount that my employer would pay for health insurance as premium sharing to be applied towards dental, vision, and AD&D insurance premiums. Let's call this amount of premium sharing P. This is in addition to my normal salary, which I'll call S.

On my paystubs, I see a "total gross" pay which is S+P. However, "fed taxable gross" (which is also the amount on my W2), is calculated as S-P. So my federal taxable income is my salary minus premium sharing (which is paid on top of my salary, not taken from my salary).

It seems to me that the taxable income should be the gross income (S+P) minus the premiums, so just S (my salary).

As it is calculated currently, when my insurance premiums increase (which they recently did), I actually end up being paid more each paycheck because my taxable income decreases. This seems totally bizarre to me.

Does anyone know anything about this? Should my premium sharing, which is paid on top of my regular salary, be deducted from my salary for calculating my taxable income? Or should it be deducted from my gross salary (which includes premium sharing) leaving my taxable income as my base salary?