What Is Health Insurance Allowance?

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    Christopher Lawrence
    Insurance Broker | Financial Consultant, Lawrence Insurance Consulting, Southern New Jersey
    A health insurance allwance is a type of defined contribution employer benefit plan.This type of benefit is usually structured into a Premium Reinbursment Account or a PRA which is basically a form of a Health Reinbursment Account or a HRA. Basically a PRA will be set up by employers who do not offer their employees traditional group health insurance options, and will consist of a flat monthly contribution to each eligible employee that is used to pay for part or all of the premiums for individual health/ancillary coverage. This practice will most likely see a large reduction in popularity because of PPACA regulations. This is because PRA's do not qualify as qualified health plans offering minimum essential coverage, which means that in the eyes of the government the employer is not offering health insurance and therefore can still be penalized. Also one of the great benefits to a PRA was the pre-tax funding that escaped payroll taxes and lowered the businesses total tax liability. This feature has been eliminated by healthcare reform, which only allows such PRA funding arraingements on a post tax basis.
    Answered on October 17, 2013
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