With the high cost of medical care in the United States, it’s no surprise that health insurance is one of the most highly sought-after benefits by employees. Many employers use benefit 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 that small employers provide health or welfare benefits to their employees. But for larger employers, it is a different story. Many larger employers offer health insurance to avoid penalties imposed by the Affordable Care Act (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 fail to provide health insurance.
Under the ACA, employers with 50 or more full-time employees (or the equivalent in 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 hefty—$3,860 per employee per year (in 2020). As a result, large employers have a strong incentive to provide health coverage. However, employees have no right to demand health care under the ACA.
To comply with the ACA, the health insurance must meet minimum requirements for coverage and affordability. Coverage must also be extended to the employee’s dependents, which are defined as biological or adopted children under the age of 26. However, spouses are not considered dependents under the ACA, nor are stepchildren or foster children.
Many smaller companies offer health insurance as a benefit, even if they aren’t required to by law. In fact, the majority of Americans have health insurance coverage through an employer. A study by the Urban Institute reported that 83.1% of all workers were offered health insurance through an employer in the first quarter of 2016.
In other words, you are likely to receive health insurance through your company, but it’s perfectly legal for employers of any size to refuse to provide it.
As is often the case, there are a few exceptions to the general rule that employers don’t have to provide health care. For example, you might have rights in the following situations:
If your employer does offer group health insurance, you have the right to continue it after you leave employment. The federal Consolidated Omnibus 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 quit, are laid off, or are fired for reasons other than gross misconduct, you can continue to receive your group health coverage, as long as you pay the full amount of the premium. (To learn more, see our article on health insurance continuation through COBRA.)