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Helen Griffin, owner of IT Pros in Overland Park, Kan., was fed up with soaring premiums her insurer was demanding. The technology firm this year began offering a $100-a-month HRA allowance, plus an additional $200 a month for workers with a spouse and children. Ms. Griffin says all five of her full-time employees were able to find individual coverage. She and her husband paid a combined $330 a month for their policies, down from $800 a month paid by the company when the business had a group plan.
Barnett Well Services LP says group insurance was too expensive at $420 a month per employee. Instead, each of the 28 workers gets $100 a month of HRA money to put toward insurance premiums or, if they prefer, other medical expenses.
It's better for individuals to buy their own health-insurance policies because, under state and federal laws, the policies can't be terminated for health reasons. By contrast, workers who lose group coverage when they're laid off or change jobs may not be able to replace it.
Employers set aside a certain sum every month, say $200, that employees can use for health expenses. The employer can write off the expense for tax purposes, just like traditional health benefits, and the money doesn't count as taxable income for the employee.