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Can You Opt Out of Employer Health Insurance Plans?

Many businesses offer employees health insurance as a benefit of working for the business. Employees sometimes opt not to take this benefit because it cuts into their weekly or monthly paycheck, and they may be able to get cheaper health insurance elsewhere. As of 2011, workers are free to do this, although the law is expected to change in 2014.

  1. Affordable Health Care Act

    • As of 2011, employees are still free to opt out of employer health insurance plans if they wish. However, the Affordable Health Care Act states that starting in 2014, employees must automatically be enrolled in employer-sponsored health care plans. Some low-income workers will be allowed to opt out of the mandatory insurance but must receive a voucher to purchase insurance through state exchange programs instead. The state exchange programs may open to larger employers in 2017, allowing more workers to choose this option.

    Employer Penalties

    • Once the employer-sponsored provisions of the Affordable Health Care Act go into effect, employers can be penalized if workers opt out of their health insurance. Employers will have to pay $2,000 in tax penalties per workers who deem their insurance too costly, while workers will get a tax break on private insurance for which they are paying instead of accepting the employer-sponsored plan.

    Reasons

    • The Affordable Health Care Act includes this provision because currently, many workers do not take advantage of employer-sponsored plans. For example, in 2007, 18 percent of workers in Kansas City, Missouri elected individual health insurance coverage rather than using employer-sponsored plans. Workers tend to elect individual coverage if they cannot afford employer-sponsored coverage; workers with children often find employer-sponsored coverage costs difficult to manage.

    Current Rules

    • Currently, employees can opt out of employer-sponsored health insurance plans. Most plans have an open enrollment period each year during which workers can make changes to their plans. Thus, workers must cancel or modify their health insurance only during this period. If an employee misses this window of opportunity, she usually cannot change her health insurance until the next open enrollment period.

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