Generally, you would not report the value of the insurance on the individuals 1099.  If the individual was a W-2 employee you would report, for informational purposes only, the value of the insurance provided.  However, the value of the insurance provided is not included in the individual's income.

There is no provision to report the value of insurance on Form 1099, for informational purposes only, without it being included this the individual's income.

If you include it as part of the compensation paid to the contractor, then it's taxable/reportable income to that contractor. It's no kind of "special" deduction for you. You just claim it "as if" you paid the cash directly to the contractor and it's deductible from your gross business income, is all.