Can Employers Offer Health Insurance Only to Certain Employees?

Question: Can an Employer Provide Health Insurance Only to Certain Employees?

I recently learned that some of my coworkers have health insurance, but I don't. I have a disability and I'm concerned that my employer is trying to avoid the costs of providing health insurance to disabled employees. It just doesn't seem fair to me. Is my employer acting within the law?

Answer

In general, employers are free to offer health insurance to some groups of employees and not others, as long as those decisions are not made on a discriminatory basis.

It may surprise you to learn that employers are not required to provide health insurance by law. But what about the Affordable Care Act (ACA)? Doesn't it require employers to provide health insurance?

The ACA imposes a penalty on employers with the equivalent of 50 or more full-time employees that fail to provide health coverage to at least 95% of their full-time employees. The ACA does not give individual employees a right to demand health care from their employers, though. If the employer fails to provide the required coverage, it can be assessed a hefty penalty by the IRS.

Other than to avoid the ACA penalty, there is no requirement that employers provide health insurance to their employees. As with most other voluntary benefits, employers are free to offer health insurance to certain groups of employees and not others. For example, employers can offer health insurance only to full-time employees, only to employees in certain job positions, only to salaried employees, or only to employees with higher seniority.

However, groups must be based on a bona fide employment-based classification, and all similarly situated employees in a particular group must be treated the same.

Discrimination Prohibited

One major exception to this rule, however, is that employers cannot discriminate based on characteristics protected by federal or state law. For example, it would be illegal for an employer to provide health insurance to women but not men, to Caucasian employees but not African American employees, or to employees without disabilities but not employees with disabilities. (For a list of protected characteristics in your state, see state laws on employment discrimination.)

That means if you're employer is denying coverage to you because of your disability, it's committing illegal discrimination. But if you don't have coverage because, for example, you work only part time, your employer is acting within the law.

Can an Employer Offer Different Levels of Health Insurance Coverage to Different Employees?

No federal law requires employers to provide the same level of health insurance coverage to all employees. For example, employers can offer a "gold plan" to full-time workers and a lower quality "silver plan" to part-timers.

However, when it comes to the provision of pay and benefits, employers must comply with federal laws that prohibit discrimination based on certain protected characteristics, such as age, race, sex, and disability. That means, for example, that employers cannot provide different levels of health insurance coverage based on an employee's race or gender.