Can Employees Buy Health Insurance Outside Our Company Plan?

You May Need to Offer Coverage To Employees, But They Don’t Need to Accept It.

When your employees buy health insurance, they have plenty of options other than enrolling in your company’s plan. While many California businesses have a legal obligation to offer health insurance to employees (and many other companies do so voluntarily), the employees of any business have no legal obligation to participate in their employer’s group health coverage. 

Employees of California businesses are free to accept or decline an offer to enroll in their company’s group health insurance plan. Instead, they can purchase individual and family health insurance coverage on the Health Insurance Marketplace, the centerpiece of the Affordable Care Act (ACA) or through the Covered California Marketplace. They can also enroll in a spouse’s plan, buy coverage directly from an insurance company, or work with an experienced individual health insurance broker to find the plan that’s right for them.

What Happens When Employees Buy Health Insurance Elsewhere?

As long as a company’s health insurance plan meets all of the minimum standards of the ACA, the company won’t suffer any negative consequences when an employee declines coverage. However, suppose the plan does not offer minimum essential coverage and employees buy health insurance on the Marketplace and qualify for a subsidy. In that case, the government may impose hefty fines on the business.

Specifically, California  businesses can face penalties if:

• The offered group health insurance plan does not cover at least 60 percent of the cost of services on average.
• The coverage is not affordable, meaning that employee contributions are greater than 9.61 percent of household income.
• The company does not offer the plan to at least 95 percent of full-time employees.
• An employee qualifies for government subsidies when seeking coverage at federal or state health insurance exchanges.

If your company’s plan does not offer minimum essential coverage as detailed above and any employees buy health insurance elsewhere because of that, be aware that it is against the law to fire or retaliate against an employee for reporting violations regarding their offered insurance or for receiving a subsidy or tax credit for insurance purchased on the Marketplace.

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How an Employee Can Decline Your Offer of Coverage

Employees can decline, or waive, an offer of health insurance from their employer by signing a form indicating their choice to do so. However, employees can only waive coverage during specific periods, such as: 

• When the employee starts work at a company.
• During open enrollment.
• 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 California employers usually obtain from their health insurance company, will contain declarations by the employee about their knowledge of the offered coverage and why they have chosen to decline it. The following is an example of such a declaration:

“I hereby certify that the medical benefits my employer provides have been explained to me and that I choose to decline to participate in the plan. By declining this offer of coverage, I understand that 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 on the form for declining coverage can include:

• I have other health insurance through my spouse’s employer.
• I have other health insurance through my former employer (COBRA or Retirement).
• I purchased my own insurance coverage directly with an insurance carrier.
• I have other insurance through a parent.
• I have other insurance through the military.
• I have state or federal health coverage through Medicaid or Medicare.
• I have no health insurance and do not want health insurance at this time.

The waiver form must be signed by the employee and submitted to their employer, who will, in turn, submit the waiver to the health insurance carrier. 

Questions About California Group Health Insurance Coverage? We Have Answers.

As an experienced Southern California small business group health insurance and individual health insurance broker, Preferred Insurance can answer your questions and provide practical, affordable solutions for your insurance needs. We will always have your best interests at heart and deliver the personal service and expert guidance you need.

Contact Preferred Insurance today to arrange for your free consultation!

More From Our California Group Health Insurance Plans Blog:

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Should You Offer Health Insurance Benefits to Seasonal Employees?

How Do I Buy Group Health Insurance For My Small Business Employees?