Do You Have to Get Employer-Sponsored Health Insurance?

Even if you’re eligible, you’re not required to get health insurance from your job. Your company may not offer it or may delay enrollment from your start date.

Employer-sponsored health insurance may be the right option for you, but there are exceptions to consider before deciding to enroll.

Employer Health Insurance in America

Healthcare in America comes largely in the form of employer-sponsored health insurance. More than half of Americans under 65 receive employer health insurance, instead of through their own efforts or a government program.

If health insurance benefits matter to you, you’re not alone. According to one major study, better health insurance is the most important consideration for job applicants after salary.¹ All in all, health insurance benefits are a consideration for 9 out of 10 workers. It’s also the most expensive benefit an employer can provide.

Do Employers Have to Offer Health Insurance? If so, what kind?

Depending on company size, employers may or may not have to offer coverage to their workers. But if they do, the health plan must meet certain minimum requirements.

Companies with 50+ Employees

Companies with 50 or more full-time employees are required to offer healthcare to their full-time employees. Smaller companies have the option to do so, but they’re also able to pass the responsibility of finding healthcare on to you.

“Affordable Coverage” Under an Employer

The insurance that large companies offer must, at a minimum, pay for 60 percent of your covered healthcare expenses and require you to pay less than 9.78 percent of your household income for monthly premiums. The Affordable Care Act defines this as “affordable coverage”. But because the affordability percentage of 9.78 percent does not apply to your spouse, children, or other dependents, coverage for your dependents may be unaffordable.

When Can You Get Employer-Sponsored Health Insurance?

Once you’re hired for a new job, you probably won’t start work right away. Your employer’s health insurance may take even longer to come through. Health insurance typically won’t start until you’re hired, and even then, not all companies can offer it to you on the first day or even within the first month.

Waiting Period

The waiting period for health insurance from employers can’t last more than 90 days. That’s a choice that your employer has to make when choosing and paying for insurance.

Are You Eligible for Employer Health Insurance?

Your employer can offer health insurance to some employees but not others. If your company does offer group health insurance, the number of hours that you work determines whether or not you automatically qualify for affordable healthcare through your job.

Full-Time Employees

You’ll need to be on the clock for an average of 30 hours per week to be considered a full-time employee who’s eligible for employer-sponsored health insurance. If you’re a seasonal worker, you also must expect to work for 120 days or more during the year to qualify as full time.

Part-Time Employees

If you work for fewer than 30 hours per week, your employer isn’t required to offer health insurance. Your job may still provide the option to buy health insurance if you work less than 30 hours per week, but what they could offer doesn’t have to be affordable. Part-time workers are still allowed to purchase insurance on their own with a tax credit.

Contractors

If you’re freelancing at a company, serving as an independent contractor, or working through a staffing agency, your options to get employer-sponsored health insurance may be limited. Your employer may pass the responsibility for coverage onto your employment agency, or simply decline to offer you coverage (which they can do, assuming that freelancers are a very small proportion of their workforce). On the other hand, you can still buy health insurance on your own.

What Kind of Coverage Is Included in Employer Health Insurance?

Large Employer-sponsored health insurance (employers with more than 50 employees) do not have to cover the 10 essential health benefits that the Affordable Care Act (a.k.a. Obamacare) requires of all individual insurance plans, but it probably will. Individual plans are designed to mimic employer-based plans, so you can expect that common medical issues will be covered.

Dependents

Your employer is required to offer you a plan that will cover your children (up to age 26), however, the can opt out of covering spouses.  Additionally, if your child becomes pregnant, then they may lose coverage under your plan.

Your employer can choose to offer you access to one of several health insurance models. You can tell what type of plan network is being offered by the three or four-letter abbreviation that’s typically part of the plan name.

HMO (health maintenance organization)

In a health maintenance organization, one large company acts as both your insurer and healthcare provider. You’ll have to choose a doctor to be your primary care provider (PCP) who can refer you to specialists. EPO and POS organizations work similarly but have a few additional options to let you access out-of-network care.

PPO (preferred provider organization)

In a preferred provider organization, you’ll have access to in-network and out-of-network care. In-network care is covered, whereas out-of-network doctors who haven’t signed an agreement with your insurer will incur higher costs to you.

HDHP (high-deductible health plan)

Some employers offer a high-deductible health plan, in which you’ll have to spend a significant sum (the “high deductible”) during the year before your plan begins to share the cost of your care. 

HRA (health reimbursement arrangements)

Health reimbursement arrangements are an increasingly common option for employers who don’t wish to be involved with health insurance. A company that uses an HRA will put money into an account that you can use for copayments, deductibles, and out-of-pocket costs or purchase individual health insurance. Employers with an HRA don’t provide health insurance, and instead, send employees to buy insurance on their own. 

Individual Coverage Health Reimbursement Arrangement (ICHRA)

Beginning January 1, 2020, U.S. businesses have a new health benefits option: the individual coverage health reimbursement arrangement (ICHRA). The ICHRA allows businesses to offer a group health plan by reimbursing employees tax-free for individual health insurance policies and other health care expenses.  The ICHRA plan must comply with ACA guidelines, including the affordability percentage of 9.78% of household income.

Should You Get Health Insurance from Your Job?

Your employer will typically pay at least some of your monthly premiums before you see a bill, quietly making your health insurance more affordable. Your employer also has access to many more health plans than you would if you tried to purchase health insurance on the individual market. In today’s market, group health insurance is typically cheaper than purchasing individual health insurance without a tax credit.

Compare Benefits

Just because you’ve been offered new health insurance, that doesn’t mean the coverage will be equivalent to what you previously had. You’ll want to ask for the details of what your employer’s plan covers – before or during your signup – and compare them to your current plan. Keep your specific medical needs over the past few years in mind, and think about how your old and new plans would apply.

Alternatives to Employer Health Insurance

You don’t have to take insurance if your employer offers it. Maybe your employer’s health insurance is too expensive or too skimpy. You can opt out of employer-sponsored health insurance and get healthcare on your own. Depending on what you choose, you may end up paying less for coverage. If you are offered employer health insurance that adheres to all of the ACA requirements of affordability, you are not eligible for a tax credit and will have to pay full price for the individual health insurance. 

Individual Plans

Losing health coverage, moving, getting married, having a baby, or adopting a child. is considered a “qualifying life event”. If you have a “qualifying life event”, you can purchase a new health plan within 60 days. Without a qualifying life event, you’d have to wait until the Open Enrollment Period to sign up for a new health insurance plan.

• You won’t be eligible for tax credits to help you purchase insurance on your own as long as the coverage offered by your employer meets the affordability standard of less than 9.78 percent of your income.
• You can seek your own coverage, which will pay for 60 to 90 percent of your essential health benefits.
• All individual plans and small employer groups are required to cover 10 essential health benefits. These benefits encompass broad benefits that take care of common health issues like doctor’s visits, immunizations, and inpatient hospitalization.

COBRA

If you’re currently the primary policyholder on another employer’s health plan, you’ll be given the option to continue it as COBRA coverage (named after the Consolidated Omnibus Reconciliation Act) for up to 18 months. However, you’ll have to pay the full premiums on your own, along with a 2 percent administrative fee.

Short-Term Health Insurance

More Americans than ever are opting for short-term policies. These are very inexpensive plans that last for as long as 364 days (although some new plans last up to 3 years) and cover catastrophic injuries and illnesses. However, these plans will generally require you to pay for a doctor on your own and may reject you if you have a pre-existing health condition. The good news is that many newer Short Term Medical plans have physician copays, cover prescription drug coverage, and some cover pre-existing conditions. So make sure you shop around before buying short-term health insurance. 

Current Health Insurance

If you have health insurance that isn’t provided through a previous employer – maybe your spouse’s insurance – then you can remain on that insurance.

Your employer may have to provide a letter on official letterhead stating they don’t offer health insurance so you may qualify for the subsidy.

Medicaid

Medicaid is a generous government program that picks up nearly all of your health insurance costs for those individuals who fall within the federal poverty level guidelines outlined by the ACA or their specific State. Able-bodied persons can’t make more than a certain amount per year to qualify for Medicaid. The qualification process is different in every state, so you’ll need to check with your state for more information.

Taking the Next Steps

Compare any plans that you can receive from your partner, state marketplace, or broker to the plan offered by your employer before enrolling in health insurance. If you’re going to go without any coverage during your employer-sponsored plan’s waiting period, look into a temporary short-term health plan.