With the high cost of health care in the United States, it’s no surprise that health insurance is one of the most sought after benefits by employees. Many employers use benefits 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 for small employers to provide health or wellness benefits to their employees. but for larger employers, it’s a different story. Many large 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 do not provide health insurance.
Under the ACA, employers with 50 or more full-time employees (or the equivalent number of 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 substantial: $3,860 per employee per year (in 2020). As a result, large employers have a strong incentive to provide health coverage. however, employees do not have the right to demand medical care under the aca.
To comply with the ACA, health insurance must meet minimum coverage and affordability requirements. Coverage must also extend to the employee’s dependents, defined as biological or adopted children under the age of 26. however, spouses are not considered dependents under the aca, nor are stepchildren or adopted children.
health insurance coverage as a voluntary benefit
Many smaller companies offer health insurance as a benefit, even if the law doesn’t require it. In fact, most Americans have health insurance coverage through an employer. an urban institute study reported that 83.1% of all workers were offered health insurance through an employer in the first quarter of 2016.
In other words, you probably receive health insurance through your company, but it’s perfectly legal for employers of any size to refuse to provide it.
when can an employer be required to provide health care coverage
As is often the case, there are some exceptions to the general rule that employers do not have to provide medical 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 that gives you certain rights or benefits, such as health insurance, your employer must honor that promise. the same is true if you are a union employee and your collective bargaining agreement guarantees health care.
- employees in similar situations are offered medical attention. under health insurance portability & Accountability Act (HIPAA), employers that offer group health insurance must offer it to similarly situated employees. Employers may 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 position of work. however, within those groups, similarly situated employees should be treated the same.
- Your employer offers health insurance in a discriminatory manner. Under Title VII of the Civil Rights Act and other federal laws, employers may not discriminate in employment, including compensation and benefits, for reasons of race. color, sex, 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 40 (for more information, see our FAQs on workplace discrimination and harassment).
employer health insurance continuation laws
If your employer offers group health insurance, you have the right to continue it after you leave employment. The federal Consolidated 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 resign, are laid off, or are terminated for reasons other than gross misconduct, you may continue to receive your group health coverage, as long as you pay the full amount of your premium. (For more information, see our article on continuation of health insurance through Cobra.)