Do I Have to Use My Employer’s Healthcare Plan?

January 31, 2016

Some employers offer a healthcare plan as part of their employee benefits package. Typically, employers offer several plans with different coverage options and costs for individuals, spouses and family plans. The Federal Affordable Care Act requires all individuals to have health coverage and it imposes fines on individuals and parents who fail to get covered or fail to get their children covered.

The Act also requires certain employers (generally those with over 50 full time employees) to offer health insurance or pay tax penalties if they do not. There is no legal mandate requiring that employers offer health insurance coverage. Some may decide the that paying a tax penalty to the IRS is cheaper and a good business decision. Other businesses may satisfy this obligation by providing a subsidy to employees that allows them to obtain insurance on the state-run exchanges. Small businesses are not required to offer health insurance coverage and are not subject to any penalties if they fail to do so. Any employer offering health insurance coverage must do so on a consistent basis in order to benefit from tax deductions. Nor can employers discriminate against certain employees by withholding insurance benefits.

Employees are not required to join an employer’s health care plan. But, as stated above, they may face penalties from the IRS if they fail to obtain some form of coverage. If employees wish to purchase plans outside of their employer offered plans they may have to pay full market value for the plans. In addition, they may not qualify for premium subsidies or tax credits. This depends on how much the employee earns annually and also how much the employee is required to pay out-of-pocket for health care expenses.

The Affordable Care Act requires that parent plans (including employer-sponsored plans) cover adult children up to age 26, regardless of the adult child’s: income, residential address, whether they have access to a plan through their own employer, marital status, or education. This requirement gives adult children up to age 26 the option of staying on either parents plan, joining one offered by their employer or purchasing one from the state run marketplace. This does not apply to Medicaid. In that situation, the adult children would have to apply for Medicaid coverage on their own.