Is My Employer Required to Provide Health Care Coverage?

The Affordable Care Act imposes severe penalties on medium-sized and large employers who fail to provide health insurance to their workers.

By , Attorney (University of San Francisco School of Law)

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).

ACA Rules on Employer-Sponsored 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$4,460 per employee per year (in 2024). 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.

Voluntary Health Insurance Coverage

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.

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.

When Does an Employer Have to Offer Health Insurance?

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:

  • Your employment contract requires it. Most employees in the United States work at will. However, if you have a written (or oral) employment contract giving you certain rights or benefits—such as health insurance—your employer must follow through on that promise. The same is true if you're a union employee and your collective bargaining agreement guarantees health care.
  • Similarly situated employees are offered health care. Under the Health Insurance Portability & Accountability Act (HIPAA), employers that offer group health insurance must offer it to similarly situated employees. Employers can 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 job position. However, within those groups, similarly situated employees must be treated the same.
  • Your employer is offering health insurance in a discriminatory manner. Under Title VII of the Civil Rights Act and other federal laws, employers cannot discriminate in employment—including compensation and benefits—on the basis of race, color, gender, 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 age 40. (To learn more, see our FAQ on workplace discrimination and harassment.)

COBRA: Employer Health Insurance Continuation Laws

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.)

How Many Employees Does My Employer Need to Have Before Health Insurance Is Required?

Under the Affordable Care Act, employers with 50 or more full-time employees (or full-time equivalents) must provide health insurance coverage to 95% of their full-time employees. If they fail to meet this requirement, they'll owe a penalty to the IRS.

Do Small Businesses Have to Offer Health Insurance?

No federal law requires small companies to offer health insurance coverage.

Do Employers Have to Provide Employees With Health Benefits During Their Leave?

If you're taking leave under the Family and Medical Leave Act (FMLA) or a similar state law, your employer generally must maintain your health coverage during your period of leave. However, you'll still have to pay your portion of the premiums.

Whether you continue to receive health coverage during voluntary leave depends on the policies established by your employer. Some employers maintain health insurance benefits during voluntary leave as part of their employee benefits package; others do not. Check your employee handbook or talk to your human resources department prior to taking leave to learn whether you'll be covered.

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