Not everyone has the same needs or wants when it comes to insurance, but there is a way to still offer employees of a business all the options inside of a single plan—it’s called a cafeteria insurance plan.
What is Cafeteria Insurance?
A group cafeteria plan is a type of health insurance offered within a group insurance plan where participants can pick and choose what type of pre-tax benefits they want to roll into their plan.
Much like a cafeteria, the cafeteria plan has a range of offerings for benefits that participants can select based on their personal preferences and needs.
This type of plan can be popular with companies because it allows them to provide the services that participants want and need without providing unwanted or unnecessary services.
This makes it a unique and desirable kind of insurance plan both for employers and employees in many situations.
What Does Cafeteria Insurance Cover?
A cafeteria plan can cover a wide range of medical services for users.
Since it allows for potential benefits of health savings accounts, also known as HSAs, disability insurance, and group term life insurance, it can help employees cover medical costs that are covered by insurance typically as well as those that may not be covered by insurance such as co-pays and prescribed supplements.
Additionally, the cafeteria plan can cover some selections such as flexible spending accounts, adoption assistance plans, and cash-related benefits.
Obviously, not every participant will need or want all of these kinds of benefits. What makes a cafeteria plan unique is its ability to address the specific needs of individuals.
What Does Cafeteria Insurance NOT Cover?
A cafeteria plan does not cover items and claims that are not part of an individual employees’ cafeteria plan.
For example, if an employer states that employees may only modify their cafeteria plan once yearly, an employee who is ineligible for modifying the cafeteria plan will not be able to make a change to their plan even if circumstances change.
A cafeteria plan that is composed of a flexible spending account and health savings account will not, for example, cover adoption assistance benefits or childcare fees if those are not a part of the individual cafeteria plan that an employee has chosen.
Additionally, a cafeteria plan does not cover non-employees like contractors.
What are the limitations?
Some limitations of cafeteria plans include their inability to be changed more than once a year at an appointed window of time and limitations on when some benefits are available.
Additionally, some plans are limited in how much employees can contribute to specific benefits at a pre-tax rate and may hold workers tax-liable in certain ways.