Can an Employer Cease Health Insurance Benefits for Their Employees?

While many employers provide their workers with health insurance, it's a benefit, not a right. In most cases, it's legal for your employer to stop providing insurance to you and your co-workers or to company retirees or to reduce the benefits available. Under the federal health-care reform bill, however, many employers will face fines if they don't provide employees with insurance.

Health Insurance

• Unless there's a contract or labor agreement that obligates your employer to pay for your insurance, it's optional. Companies are free not to provide a health plan, or to restrict it to, say, executives only. Your employer could also cut benefits, switch to a cheaper plan or charge you more. State law may mandate that companies that do offer insurance provide specific benefits. Minnesota, for example, requires most employer-based plans to cover prenatal care, diabetes, emergency care and mental health.

COBRA

• Under some circumstances, a company may cut benefits to individual employees. For example, if you start working less than 30 hours a week, your employer may be able to stop paying for your coverage, even if you're working part-time because of a job-related injury. In most such cases, however, you can take advantage of the federal COBRA rules that let you keep insurance for 18 months. You'll have to pay both the employee's and employer's part of the premium under COBRA, however, which will make coverage expensive.

HIPAA

• The 1996 Health Insurance Portability and Accountability Act (HIPAA) places further limits on how employers manage your health insurance benefits. HIPAA does not require that employers provide health insurance, nor does it require that employer plans provide specific benefits. However, it does prevent them from excluding, dropping or discriminating against you based on previous claims or prior medical history. If you've had treatment for a previous medical condition in the six months before you're hired, however, HIPAA allows the company to impose a waiting period before covering your pre-existing condition.

Reform

• The 2010 Patient Protection and Affordable Care Act will change employers' options starting in 2014, when the new rules take effect. Employers with more than 50 employees who don't offer workers coverage will pay an annual $2,000 fine if they have more than 30 uninsured employees working 30 hours a week or more. The fine is per individual. If the company has 33 workers, it pays $6,000 a year, or $2,000 for each worker beyond 30.