Employer Coverage of Health Insurance & Employees' Legal Protections
Healthcare costs tend to mount quickly to staggering amounts, so many employees are hopeful that their employer will provide them with health insurance coverage. There is no universal rule that an employer must provide this coverage, although the Affordable Care Act requires employers of a certain size to pay a penalty if they do not provide health insurance. However, many companies that are not technically required to provide health insurance to their employees choose to provide it as a way of attracting superior talent. Over 80 percent of employees in the U.S. have the option to receive coverage through their employers.
If you receive health insurance through an employer that has 20 or more employees, you will be able to continue receiving it after you leave that employer in most situations. This is true regardless of whether the employer or the employee terminates the employment relationship. You will need to pay the full amount of the premium to stay enrolled in the plan. An exception applies to employees who are fired for gross misconduct, who do not have a right to stay in the plan.
Temporary continued health coverage for unemployed individuals is available through COBRA.
Protections Under the Affordable Care Act
If an employer has 50 or more full-time employees, they must provide health insurance coverage to at least 95 percent of those employees to avoid paying a penalty. This rule provides a strong incentive to covered employers, since the penalty will cost them thousands of dollars for each employee who does not have coverage. Any coverage provided by the employer also must meet certain requirements regarding its scope and cost. Children of an employee who are under 26 years old must be covered by the employer’s plan, but spouses do not need to be covered. Adopted children are covered, but stepchildren and foster children are not.
The Affordable Care Act does not provide employees with a right to demand that an employer provide health insurance coverage. An employer simply has a choice between providing coverage or paying the penalty to the IRS.
When Employers Must Provide Health Insurance
Sometimes an employer will specifically state in an employment contract or a collective bargaining agreement that it agrees to provide health insurance to an employee. It has an obligation to honor that commitment, even though the law does not require it to provide health insurance. Otherwise, an employee can sue the employer to enforce the contract.
Employers are not allowed to discriminate against employees based on certain protected traits, such as race, sex, national origin, religion, age, and disability. Anti-discrimination laws apply to all of the terms and conditions of employment. Thus, if an employer chooses to provide health insurance to many employees but excludes employees in a protected group, they have a right to demand health insurance or sue the employer for discrimination.
Did You Know?
If an employer offers group health insurance, it must offer it to all similarly situated employees.
Also, the Health Insurance Portability and Accountability Act (HIPAA) requires employers to offer group health insurance to all employees who are similarly situated. A full-time employee may be situated differently from a part-time employee, or someone in one state may be situated differently from someone in another state. Other distinctions may relate to seniority or position. An employer can draw distinctions between groups of employees based on bona fide employment classifications, but it must treat all of the employees in a certain classification in the same way. The employer cannot create arbitrary classifications for the purpose of withholding coverage from some employees.