An allowance is the monthly sum an employer gives to each employee to cover the cost of their medical plan (and other qualifying medical expenses, if applicable). An allowance is permanent for an entire plan year, and it may be based on various criteria.
What factors can determine allowance levels?
The factors that determine allowances are called classes. These classes can include:
Age: employers may provide higher allowances to older employees because Individual Health Plans (IFPs) increase in price with age.
Allowances may be determined for each specific year of age (i.e. 29, 30, 31) or for an age bracket (i.e. 25-29, 30-34, 35-39, etc.).
Allowance amounts are always determined by an employee’s age at the beginning of the plan year (usually January 1). It remains permanent for the duration of the year, even after an employee has a birthday, as premiums also stay constant for the duration of a plan year.
Family unit: employers may allow employees to add additional family members to the medical plan and may provide additional funding to cover the extra premium costs.
Allowance may have 4 levels (Employee-Only, Employee+Spouse, Employee+Children, and Family) or 8 levels (where the allowance amount changes depending on whether the employee has 1, 2 or 3 or more children in the Employee+Children or Family categories).
Geography: employers may give different allowance amounts to employees living in different states because IFPs change in price based on geographical location.
Allowances are always determined according to the employee’s primary residential address, and employees cannot indicate more than one address.
Employment type: employers may give different allowance amounts according to an employee’s employment status with the company
Allowance could vary according to how much employees work (full-time vs. part-time), compensation method (salaried vs. hourly), or other employment characteristics (seasonal vs. permanent).
Employees can determine their allowance amount in their personal Zorro account.