Can Your Company Require an Employee to Buy Health Insurance?

Under the Affordable Care Act, large employers that don’t offer their full-time workers comprehensive, affordable health insurance face a fine.

But some employers are taking it a step further and requiring workers to buy the company insurance, whether they want it or not. Many employees may have no choice but to comply.

Some workers are not pleased. One disgruntled reader wrote to Kaiser Health News:

My employer is requiring me to purchase health insurance and is automatically taking the premium out of my paycheck even though I don’t want to sign up for health insurance. Is this legal?”

When employees can be required to pay for a plan

The short answer is yes. Under the health law, employers with 100 or more full-time workers can enroll them in company coverage without their say so as long as the plan is affordable and adequate. That means the employee contribution is no more than 9.5 percent of the federal poverty guideline and the plan pays for at least 60 percent of covered medical expenses, on average.

“If you offer an employee minimum essential coverage that provides minimum value and is affordable, you need not provide an opt out,” says Seth Perretta, a partner at Groom Law Group, a Washington, D.C., firm specializing in employee benefits.

If a plan doesn’t meet those standards, however, employees must be given the opportunity to decline those company plans, under the ACA. They can shop for coverage on the health insurance marketplaces and may qualify for premium tax credits if their income is between 100 and 400 percent of the federal poverty level.

Those premium subsidies aren’t available to workers whose employer offers good coverage that meets the law’s standards.

Experts say they don’t expect many employers to strong-arm their workers into buying health insurance. Those that do may be confused about their responsibilities under the Affordable Care Act, mistakenly believing that in order to avoid penalties they have to enroll their workers in coverage.

Is forced coverage counterproductive?

“That is just dead wrong,” says Timothy Jost, a law professor at Washington and Lee University who’s an expert on the ACA.

“Nothing in the Affordable Care Act directs employers to make their coverage mandatory for employees,” says a Treasury Department spokesperson. The law requires large employers “to either offer coverage or pay a fee if their full-time workers access tax credits to get coverage on their own in the marketplace.”

Employer penalties for not offering insurance that meets the health law’s standards can run up to $3,000 per employee.

For employers, forcing coverage on their workers could be counterproductive. “Do you really want to limit employees’ ability to select whether they get this coverage? What impact does that have from talent management perspective?” says Amy Bergner, managing director at human resources consultant PwC.

The practice of automatically enrolling employees in health insurance isn’t new. Many employers have been doing it for years. Some enroll new employees in the least expensive company plan, for example. But employees have generally had the option to opt out of the coverage if they wish.

Automatic enrollment makes it simple to satisfy the health law’s requirement that most people have health insurance, experts say.

Labor Department regulations are expected

The health law stipulates that employers with more than 200 full-time workers are required to enroll newly hired full-time employees in a plan unless the employee specifically opts out of the coverage. However, the provision won’t take effect until the U.S. Department of Labor issues regulations.

Employees who are unhappy about being required to buy into a company plan could complain to the Department of Labor, some experts say. It’s unclear whether such efforts would succeed.

Employment law experts point to a 2008 decision by the Labor Department dealing with state laws that restrict employers from making deductions from workers’ paychecks without their consent. The department issued an advisory opinion saying that federal ERISA law pre-empted a Kentucky law that required an employer to get an employee’s written consent before withholding wages to contribute to a group health plan.

Although that decision doesn’t have the force of law, it suggests how the Labor Department views such issues, says Cheryl Hughes, a principal at Mercer’s Washington Resource Group.

This article was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente. It was produced with support from The SCAN Foundation.