When Your Employee Says Thanks, But No Thanks, To Your Group Health Insurance Plan
When an employee declines health insurance coverage your company offers, that doesn’t mean they are ungrateful or find your plan lacking in some way. There are many reasons an employee would decline an opportunity to participate in your group plan. They may have coverage under their spouse’s or parents’ policy. They might already have individual or family coverage they purchased on the Health Insurance Marketplace or through the Covered California Marketplace. They may be happy with the plan they bought directly from an insurance company or an experienced individual health insurance broker.
That is why, even though many California businesses are legally required to offer employees health insurance, and others do so voluntarily, employees are free to make their own insurance choices. Employees have no legal obligation to participate in their employer’s group health coverage.
When An Employee Declines Health Insurance, It Shouldn’t Be Because of a Non-Compliant Plan
So long as an employer’s group health insurance plan meets all of the minimum standards established by the Affordable Care Act (ACA), there is no issue when an employee declines health insurance coverage. However, if the company’s plan does not provide minimum essential coverage and an employee then buys coverage on the Marketplace and qualifies for a subsidy, the employer faces the possibility of significant fines and penalties.
Specifically, the federal government can penalize a business if:
- The offered and declined plan did not cover at least 60 percent of the cost of services on average;
- The offered plan is not affordable, meaning that employee contributions are greater than 9.61 percent of household income;
- The employer does not offer coverage to at least 95 percent of full-time employees; and
- An employee qualifies for government premium subsidies when purchasing coverage at federal or state health insurance exchanges.
For the 2022 tax year, the IRS can impose penalties for offering unaffordable or non-compliant ACA coverage at $343.33 a month per employee or $4,120 for the year. Additionally, if your company’s plan does not provide minimum essential coverage and an employee enrolls in coverage elsewhere, you cannot legally fire or retaliate against the employee for reporting violations regarding their offered insurance or for receiving a subsidy or tax credit for insurance purchased on the Marketplace.
How an Employee Declines Health Insurance Formally
Employees can decline or waive an offer of group health insurance from their employer by signing a form making clear their choice. However, employees can only waive coverage during specific periods, such as:
- When the employee starts work at a company.
- During an open enrollment period.
- If the employer offers a new plan or coverage.
- If the employee has a qualifying life event that allows them to remove benefits, such as marriage, divorce, or the birth of a child.
The waiver form, which your company can obtain from your group health insurance company, will contain declarations by the employee about their knowledge and awareness of the offered coverage and why they are choosing to decline the group health insurance benefits. The following is a typical example of such a declaration:
“I hereby certify that the medical benefits offered by my employer have been explained to me and that I choose to decline to participate in the plan. By declining this coverage offer, I may not have another opportunity to enroll unless I qualify for a Special Enrollment Period. I also understand that the plan offered by my employer is an ACA-compliant health plan and that by declining to enroll in this plan, I will not be eligible for a premium subsidy at either a federally operated or state-based insurance exchange.”
The listed reasons for declining coverage can include that the employee:
- Has other health insurance through their spouse’s employer.
- Has other insurance through a parent.
- Has other health insurance through their former employer (COBRA or Retirement).
- Purchased their own insurance coverage directly with an insurance carrier.
- Has other insurance through the military.
- Has state or federal health coverage through Medi-Cal or Medicare.
- Does not have, and does not want, health insurance coverage.
The waiver form is a protection for your California business. Having an employee that declines health insurance complete and sign the form ensures that your business will not face the legal and financial consequences of not providing adequate coverage.
Questions About Group Health Insurance Coverage For Your California Business?
As an experienced California group health insurance broker, Preferred Insurance can answer your questions and provide practical, affordable solutions for your employee’s health insurance needs. We will be there for your company and your employees, ensuring that the coverage you pay for will be appropriate for your business needs and your employees’ wants.
Contact Preferred Insurance today to arrange for your free consultation to discuss your small business health insurance needs.