About Pre-Tax Health Insurance Plans

Pre-tax health insurance plan or cafeteria plan is what an employer can offer so that the employees have an option to elect between taxed or non-taxed insurance. The benefits can include adoption assistance, dependent care coverage as well as a health savings account. The employer must specify the particular benefits that they have available as a company. There are also rules for eligibility and election.

There are multiple features associated with a Pre-Tax Health Insurance Plan, but only what the employer offers is available to its employees.

• Premium Conversions - This is an option where the employee’s pre-tax dollars are used to help with family health care expenses. The employee will estimate from year to year the amount needed for health-related costs. With this option, the employee’s take-home pay is reduced by the amount that is contributed to the pre-tax plan.

• Flexible Spending Arrangement - Medical and dependent care reimbursement accounts are referred to as a flexible spending arrangement. This gives the employee the option to use their pre-tax dollars to pay for specific expenses, out-of-pocket. The pre-tax plan will reimburse the employee for certain expenses.

• Health Care Reimbursement Account - The health care reimbursement account (HCRA) is an option in which pre-tax dollars are used to pay for certain medical costs that are not covered by insurance. Chiropractors, dental work and birth control can be a few of the expenses covered by the HCRA.

• Use It or Lose It Provision - The pre-tax plan also has a provision known as “use it or lose it”. This provisions means that any pre-tax dollars that are unused by the end of the year do not roll over.