This article is a summary of a section from our free resource, Small Business Health Insurance Reimbursement: Annual Report 2017. Download the full report by clicking here.
In the face of rising health costs nationwide, reimbursement plans like health reimbursement arrangements (HRAs), by which businesses provide allowances to employees to reimburse their health expenses, are an increasingly popular alternative to group health insurance. How these plans are executed varies depending on several metrics, however, including geography and industry. One factor that’s likely contributing to the differences in health reimbursement popularity is the range of allowances among the states. These allowances are the dollar amount made available to employees for qualified reimbursements.
In our 2017 Annual Report, we analyzed reimbursement plan allowances nationally, regionally, and state by state.
National and Regional Average Allowances
Nationally, worker allowances are $501 per month on average. You can break this down further by separating employee allowances by family coverage. For workers with self-only coverage, the average national monthly allowance is $357. For employees with a family, the national allowance average is $606.
There are also differences based on region. The Southern states have the lowest regional average allowance at $477. The Midwest ranks second from the bottom at $499. Next is the West at $517, and the Northeast has the highest regional monthly allowance at $546.
State-by-State Average Allowances
Next, we analyzed the average employee allowance amount by state, which is where you’ll see a more significant range. For example, there is a sizeable disparity between the states with the top five monthly allowances versus the states in the bottom five.
Top 5 States Average Allowance
- Hawaii: $833
- Rhode Island: $797
- Washington: $782
- New Jersey: $745
- Alaska: $657
Bottom 5 States Average Allowance
- South Dakota: $311
- West Virginia: $356
- New Mexico: $366
- Maine: $379
- Tennessee: $417
Average Use Rate by State
There is also variation among the states in employees’ use of their allowances. For example, an employee with an allowance of $400 per month and expenses totaling $300 per month has a use rate of 75 percent. If the same employee has expenses totaling $450 per month, the use rate is 100 percent of the allowance.
As with average state allowances, the average state use rates vary widely.
Top 5 States Use Rate*
- Delaware: 100 percent
- Louisiana: 100 percent
- Montana: 100 percent
- New Mexico: 100 percent
- West Virginia: 100 percent
- Wyoming: 100 percent
* There are six states with a use rate of 100 percent, which effectively makes the top five here a six-way tie.
Bottom 5 States Use Rate
- Washington: 53 percent
- Hawaii: 54 percent
- Oklahoma: 66 percent
- New Hampshire: 68 percent
- Arkansas: 71 percent
These stats tell us that reimbursement plans are adaptable to many different situations. For example, companies in states with high average premiums might see higher use rates for their allowance amounts, and businesses in states with low average premiums can provide lower allowance amounts. For a more in-depth look at what reimbursement plan allowances look like by region, state, business size, and industry, download the free report here. For tips and information on how to set up an HRA for your small business, download our free eBook: The Comprehensive Guide to the Small Business HRA.
Does your company offer an HRA? Let us know how it works for you in the comments below.