If my employer offers health insurance do i have to take it

The Affordable Care Act imposes severe penalties on medium-sized and large employers who fail to provide health insurance to their workers.

With the high cost of medical care in the United States, it's no surprise that health insurance is one of the most highly sought-after benefits by employees. Many employers use benefit packages—including health, vision, and dental coverage—to attract and retain employees.

For small employers, benefit plans tend to be offered on a voluntary basis: there is generally no legal requirement that small employers provide health or welfare benefits to their employees. But for larger employers, it is a different story. Many larger employers offer health insurance to avoid penalties imposed by the Affordable Care Act (ACA).

Employer-Sponsored Health Insurance and the ACA

No law directly requires employers to provide health care coverage to their employees. However, the Affordable Care Act imposes penalties on larger employers that fail to provide health insurance.

Under the ACA, employers with 50 or more full-time employees (or the equivalent in part-time employees) must provide health insurance to 95% of their full-time employees or pay a penalty to the IRS. This penalty is quite hefty—$3,860 per employee per year (in 2020). As a result, large employers have a strong incentive to provide health coverage. However, employees have no right to demand health care under the ACA.

To comply with the ACA, the health insurance must meet minimum requirements for coverage and affordability. Coverage must also be extended to the employee's dependents, which are defined as biological or adopted children under the age of 26. However, spouses are not considered dependents under the ACA, nor are stepchildren or foster children.

Health Insurance Coverage as a Voluntary Benefit

Many smaller companies offer health insurance as a benefit, even if they aren't required to by law. In fact, the majority of Americans have health insurance coverage through an employer. A study by the Urban Institute reported that 83.1% of all workers were offered health insurance through an employer in the first quarter of 2016.

In other words, you are likely to receive health insurance through your company, but it's perfectly legal for employers of any size to refuse to provide it.

When an Employer Might Be Required to Provide Health Care Coverage

As is often the case, there are a few exceptions to the general rule that employers don't have to provide health care. For example, you might have rights in the following situations:

• Your employment contract requires it. Most employees in the United States work at will. However, if you have a written (or oral) employment contract giving you certain rights or benefits—such as health insurance—your employer must follow through on that promise. The same is true if you're a union employee and your collective bargaining agreement guarantees health care.
• Similarly situated employees are offered health care. Under the Health Insurance Portability & Accountability Act (HIPAA), employers that offer group health insurance must offer it to similarly situated employees. Employers can decide to offer health insurance to different groups of employees based on a bona fide employment classification—for example, based on full-time or part-time status, length of employment, geographic location, or job position. However, within those groups, similarly situated employees must be treated the same.
• Your employer is offering health insurance in a discriminatory manner. Under Title VII of the Civil Rights Act and other federal laws, employers cannot discriminate in employment—including compensation and benefits—on the basis of race, color, gender, national origin, age, disability, pregnancy, religion, or genetic information. For example, it would be illegal for your employer to offer health insurance only to men or only to those under age 40. (To learn more, see our FAQ on workplace discrimination and harassment.)

Employer Health Insurance Continuation Laws

If your employer does offer group health insurance, you have the right to continue it after you leave employment. The federal Consolidated Omnibus Budget Reconciliation Act (COBRA) requires employers with 20 or more employees to allow their employees to continue health care coverage at their own expense.

If you quit, are laid off, or are fired for reasons other than gross misconduct, you can continue to receive your group health coverage, as long as you pay the full amount of the premium. (To learn more, see our article on health insurance continuation through COBRA.)

Access to job-based health insurance may be desirable for some, but others may be tempted to explore their options outside the workplace. We’ll address the following kinds of questions in this blog post:

• Under the Affordable Care Act (ACA), if your employer offers health insurance, do you have to take it?
• Is your employer required to offer health insurance to begin with?
• Can your employer cancel your health insurance, or provide you with a premium reimbursement and send you to HealthCare.gov or a state-based exchange?

You can also learn about your options if you have an employer’s high premium or high deductible group health plan.

The employer shared responsibility provision requires certain employers to provide minimum essential coverage to full-time employees. Whether or not it applies to your workplace depends on how many people your workplace employs and the number of hours those employees work on average.

As of 2015, companies with 50 or more full-time employees, including full-time equivalent employees, are required by the ACA to offer workers health insurance plans that provide minimum essential coverage or pay a tax penalty known as the employer shared responsibility payment.[0]

Learn more about the employer shared responsibility provision at IRS.gov.

Small business owners with 50 or fewer employees may not be obligated by law to provide group health insurance, but they can offer it through the federally facilitated Small Business Health Options Program (SHOP) marketplace or their state-based exchange SHOP marketplace.[1]

Visit the SHOP marketplace at Healthcare.gov.

Do You Have to Take Your Employer’s Health Insurance?

Nothing says that if your employer offers health insurance you have to take it. However, if your motivation for waiving job-based coverage is enrolling in a subsidy-eligible policy through HealthCare.gov or a state-based exchange, then you may want to reconsider because you likely won’t qualify for subsidies.[2]

Why?

Under the ACA, you won’t be eligible for a subsidy if you have access to job-based health insurance that is both:[3]

1. Considered “affordable” – meaning your share of the premium cost comprises no more than 9.78% of your annual household income in 2020 for the lowest cost self-only ACA plan,[4] and
2. Meets the ACA’s minimum value for employer-sponsored health insurance – the health insurance policy both pays at least 60% of the total cost of medical services for a standard population and has benefits that include substantial coverage of physician and hospital services.[5]

Can Your Employer Cancel Your Health Insurance?

As stated above, the ACA requires employers of a certain size to provide access to ACA-compliant health insurance or face a tax penalty.[6] So, yes, they could technically cancel your health insurance coverage, but it may not be in their best interest if the law requires them to provide access to it.

Your state also has laws regarding employer coverage. If you have questions or concerns regarding health insurance and your workplace, contact your company’s HR representative or your state’s department of labor.

Can Your Employer Give You Money to Buy Health Insurance Elsewhere?

Yes. A new rule finalized in July, 2019 allows any employer of any size to offer a new category of health reimbursement arrangement (HRA), called an “Individual Coverage HRA” (ICHRA).[7]

This new HRA integrates with individual health insurance products such as those that you obtain through the ACA Exchange (healthcare.gov), your state’s ACA marketplace, or directly from an insurance company.[8]

With the new rule companies may offer this option instead of a traditional ACA-qualifying group health plan.[9]

If your employer is offering you an ICHRA this year, here are some things to be aware of:

• You are not eligible for ACA premium tax credits if you’re accessing an individual ACA plan through an employer’s ICHRA
• You are not eligible for ACA cost sharing reductions through the ICHRA
• Some individual health plans have narrow networks, which can result in higher out-of-pocket costs[10]

Learn more about HRAs, including the rule change and ICHRAs.

The materials available at this web site are for informational purposes only and not for the purpose of providing legal or tax advice. You should contact your attorney or tax professional to obtain advice with respect to any particular issue or problem.

What if You Don’t Have Job-Based Benefits?

Prior to the coronavirus (COVID-19) pandemic and subsequent job losses in 2020, nearly half of the working population had employer-sponsored health insurance.[11]

But what if you’re not among them and need to obtain coverage on your own?

If you’re self-employed, unemployed, or an independent contractor, you may want to investigate individual ACA-compliant major medical insurance or a non-ACA insurance option like short term health insurance instead of being uninsured.

Individual Major Medical ACA Insurance

Major medical insurance is considered minimum essential coverage under the ACA. That means it complies with the ACA’s essential health benefits requirement, which includes a wide range of medical services from standard preventive care visits and screenings to hospitalization and chronic disease care.

As required by the ACA, these plans are also guaranteed issue, meaning you cannot be charged more or denied coverage due to a pre-existing condition or your health history.

In addition, you may qualify for a subsidy or premium tax credit when you enroll in a major medical insurance policy through the federal or state exchanges. However, this type of coverage is only available during the annual open enrollment period or when you qualify for a special enrollment period.

Learn more about major medical insurance and find out if it’s right for you.

Ready to shop ACA plans during open enrollment or a special enrollment period?

Get Major Medical Insurance Quotes

Short Term Medical Insurance

Short term medical insurance is not ACA-qualifying coverage. These plans provide less coverage than major medical plans and are not guaranteed issue – and their premiums reflect that as they are typically lower than ACA plans.[12]

Short term plans are intended to provide temporary coverage for unexpected illnesses and injuries that require a visit to the hospital while you’re between jobs and major medical plans.
They’re not intended to be a long-term coverage solution.

You cannot get subsidies or tax credits for these types of plans and since they’re not guaranteed issue you may be denied coverage or pay more based on your health status.

Short term health plans are available from 30 to 364-days depending on your state but they’re not available in all states. Short term plans are not subject to the annual open enrollment period, so in most states that offer them you can apply for short term health policies 365 days a year. If you’re approved there is no waiting period; you can begin coverage the next day.

The best way to find out if these plans are available in your area and how much it might cost you is to get a quote.

Shop Short Term Health Insurance

Summary + Next Steps

While you don’t have to take your employer’s health insurance benefits, for many, it’s still the most comprehensive and affordable option available considering that employers typically pay a sizable percentage of the premium cost, around 83% for an individual at a large company.[13]

As of January 1, 2020, current laws require some employers offer access to qualifying group health insurance,[14] which includes individual coverage HRAs.[15]

If you have questions about your employer’s health insurance offerings, contact your human resources department or the individual who administers your job-based benefits.

You can also learn more about individual coverage HRAs, individual major medical insurance, and possible options to help if your employer’s group plan is too expensive.
If you want to speak to a licensed health insurance agent to discuss your options in the individual health insurance market, call (888) 855-6837.