Many employers offer health insurance to their employees as a benefit of employment. Because employers are able to qualify for group policies, the cost of coverage is often lower than it would be from a private insurer. However, some employees would rather not purchase health insurance coverage through their employers' group policies. Fortunately, no law requires employees to accept group health insurance coverage provided by an employer.
Many employees opt out of employer-sponsored insurance programs because their income isn't high enough to cover the premiums. According to the Washington Post, only 37 percent of full-time workers who earn less than $20,000 per year will purchase their employers' insurance plans. As income increases, employees are more likely to purchase coverage. Employees who can't afford to purchase coverage through an employer often remain uninsured and pay for medical care on a case-by-case basis.
Some employees opt out of employer-sponsored health insurance policies because they can get a better deal on medical coverage from another source. Employees may purchase cheaper private insurance policies with less-comprehensive coverage, or they may be eligible for a more affordable health insurance policy through a spouse's employer-sponsored group plan. Still other employees may purchase coverage from a different insurance company because certain healthcare providers are not members of the employer-sponsored carrier's preferred provider network.
While choosing to reject an employer's offer of health insurance coverage won't result in any immediate penalties, it may prevent you from claiming certain tax deductions for insurance expenses. For example, if you or a spouse earns self-employment income, you won't be able to claim the self-employed health insurance deduction if you would have been eligible for an employer-sponsored healthcare plan. Nonetheless, you can still claim your insurance costs as a medical expense if you meet the Internal Revenue Service's requirements.
Beginning in 2014, employers cannot charge employees more than 9.5 percent of their income for health insurance coverage. Also in 2014, individuals who do not purchase insurance coverage will face monetary penalties. To avoid this penalty, individuals must either opt into their employers' policies or purchase coverage on their own. However, individuals with extremely low income may qualify for free health insurance coverage from state Medicaid programs, regardless of whether they have opted out of employer-sponsored programs.
- The Washington Post: Obamacare Requires Employers to Offer Insurance. What if it’s too Expensive?
- Internal Revenue Service: Publication 535 -- Business Expenses
- Healthcare.gov: Timeline of the Affordable Care Act
- U.S. Department of Labor. "Young Adults and the Affordable Care Act: Protecting Young Adults and Eliminating Burdens on Businesses and Families FAQs." Accessed Mar. 25, 2020.
- Healthcare.gov. "Health Coverage for Self-Employed." Accessed Mar. 25, 2020.
- U.S. Small Business Administration. "Plan to Offer Employee Benefits." Accessed Mar. 25, 2020.
- Healthcare.gov. "Small Business and the Affordable Care Act (ACA)." Accessed Mar. 25, 2020.
- Medicare.gov. "What's Medicare Supplement Insurance (Medigap)?" Accessed Mar. 25, 2020.
- HealthCare.gov. "No health insurance? See if you'll owe a fee."
- Kaiser Family Foundation. "2019 Employer Health Benefits Survey: Section 1: Cost of Health Insurance." Accessed Mar. 25, 2020.
- eHealth. "How Much Does Individual Health Insurance Cost?" Accessed Mar. 25, 2020.
- Healthcare.gov. "Enroll In or Change 2020 Plans — Only With a Special Enrollment Period." Accessed Mar. 25, 2020.
- U.S. Department of Health and Human Services. "Lifetime & Annual Limits." Accessed Mar. 25, 2020.
Amanda McMullen is a freelancer who has been writing professionally since 2010. She holds a bachelor's degree in mathematics and statistics and a second bachelor's degree in integrated mathematics education.