When Can a Company Refuse to Offer Group Health Insurance?

Employer contributions to supplement the cost of group health plans help alleviate some of the cost of health insurance. According to the U.S. Department of Health and Human Services, in 2003, almost two-thirds of Americans age 65 and under had insurance coverage through an employer's group health insurance plan. However, the law does not require employers to provide health insurance to workers, although there are several tax incentives to do so.

Requirements

• The federal government does not have any laws that require employers of any size to offer health insurance coverage to workers. Instead, employers voluntarily offer health insurance coverage as a benefit and incentive. State laws, on the other hand, may vary. For example, employers in Massachusetts that do not offer health insurance, but employ at least 11 full-time equivalent employees, must provide a Section 125 plan that allows employees to purchase health insurance on a pretax basis. These plans are also known as flexible spending plans. Employers contribute money to each employee's flexible spending account without subjecting it to federal, state or Social Security taxes. Employees can then use the money to pay for health insurance premiums or other medical expenses.

Individual Exclusions

• The Health Insurance Portability and Accountability Act regulates the health insurance plans available to employees, prohibiting employers or insurance companies from refusing health coverage to any employee who meets the employer's eligibility guidelines for enrollment. However, insurers can limit health benefits for an employee's pre-existing condition for up to 12 months, with the exception of a late enrollee, who may wait up to 18 months after coverage begins to receive full benefits for a pre-existing condition. Late enrollment occurs when an employee enrolls in an employer's group health plan after the first available enrollment period passes.

Tax Incentives

• The Affordable Care Act of 2010 has tax incentives to encourage small employers to offer health insurance. The Small Business Health Care Tax Credit repays employers up to 35 percent of their out of pocket costs for employee health insurance premiums, and will increase to 50 percent beginning in January 2014. To qualify, small-business owners must employ no more than 25 full-time equivalent workers and contribute to at least 50 percent of their premium costs. Average employee earnings cannot exceed $50,000 per year.

Considerations

• Beginning in 2014, employers with more than 50 employees must offer health insurance to their employees or face tax penalties. Employers with full-time employees participating in the health insurance exchange program due to a lack of employer coverage will have to pay a penalty of $2,000 per employee, though the penalty is waived for the first 30 employees. Furthermore, employers with more than 200 employees not only have to provide health coverage to employees, but must also automatically enroll all employees in the plan in order to avoid incurring tax penalties.