GoodRx Guide
Employer-Sponsored Health Insurance: Your GoodRx Guide
Overview
Employer-based health insurance — often called a group health plan — is a workplace benefit offered to eligible employees and their dependents. It’s a form of private insurance.
About half of Americans, or nearly 159 million people, receive health benefits through jobs or unions either as a current employee or as a retiree. Employer-sponsored health insurance is the most common way Americans get major medical coverage.
With a job-based health plan, the employer does the following:
Chooses the healthcare plan
Determines what the health plan covers
Splits the cost of premiums with enrolled employees
Most insurers and state employer health insurance laws require employers to pay at least half of the monthly cost of health insurance for eligible employees. Employers receive a tax break for paying all or a share of their workers’ premiums.
If you’re a union worker, your employer may have to offer coverage as part of a collective bargaining agreement.
Requirements
The Affordable Care Act (ACA) requires that employers with 50 or more full-time-equivalent (FTE) workers offer affordable health insurance or face a penalty. An employer must also offer health insurance to qualified dependents.
Health insurance offered by employers must meet minimum standards, including:
Affordability: Employee contributions to the health plan must not go above a certain percentage of an employee’s household income.
Minimum value: The plan must provide substantial coverage of inpatient hospital and physician services. It must also pay at least 60% of the total cost of covered healthcare services.
You can opt into your employer’s health plan or decline coverage. But you may not be able to qualify for savings (premium tax credits) to lower the cost of an ACA plan if you have an employer offer.
Enrollment
Employers allow employees to choose their healthcare plan during the company’s annual open enrollment period. It typically takes place in the fall — any time from October to December — for coverage that starts on January 1 of the following year.
You generally stick with the health plan you choose at open enrollment for all of the following year unless you change or lose your job. But you can make changes during a special enrollment if you have a “qualifying event” such as:
Having a baby or adopting a child
Losing health coverage due to a death in the family
If you start a new job, you should become eligible for employer-sponsored health coverage within 90 days of your hire date. An employer cannot enforce a waiting period beyond 90 days for eligible employees.
If you are a young adult, the ACA requires nearly all employers to allow you to remain on your parent’s health plan until you turn age 26. Several states have extended the age to 30, including:
Florida
New Jersey
New York
Pennsylvania
Costs and coverage
Your healthcare costs and coverage can change every year. During the open enrollment period, your employer will present their health insurance plan offerings, including changes in:
Cost-sharing breakdowns
Pharmacy coverage
Employers usually try to keep workers’ health insurance costs down, but the health plans they offer vary widely in affordability. Health plan options may include:
Point-of-service (POS)
High-deductible health plan (HDHP)
With each type of health plan, you’ll have to consider various costs, including the:
When you use your health plan to cover a medical service, you will receive an explanation of benefits (EOB). This will let you know how you split your healthcare costs with your health plan and any out-of-pocket expenses you may have incurred.
Spending accounts
If you have a qualified high-deductible health plan (HDHP), your employer may choose to offer a health savings account (HSA). HSA funds don’t expire, and you can take them with you from job to job. This tax-advantaged savings account provides three ways to save:
Using your pretax money to fund the account
Letting the money grow tax-free
Withdrawing tax-free funds to use on qualified medical expenses
Another savings option is a flexible spending account (FSA). This employer-sponsored health account allows you to contribute a percentage of your pretax earnings to pay for qualified medical expenses during the year. If you don’t use the funds in your account prior to the deadline, your employer will take back any unspent funds.
Some employers may offer a health reimbursement account (HRA), which works differently from an HSA. An HRA is an employer-funded plan used to pay for qualified health expenses not covered by your primary insurance.
Small employers
If you work for a small employer, you may not have the same access to health insurance as those who work for larger firms. Nearly half of employers with 3 to 9 workers offered coverage in 2021, compared with almost all employers with 1,000 or more workers.
If you do get job-based coverage at a small business, you may pay a higher share of the premium for family coverage. Your deductible may be as much as 70% higher than deductibles paid by workers at larger firms. In 2021, workers at small employers had annual deductibles averaging $2,379 versus $1,397 for those at larger firms.
Certain small business employers can purchase group health insurance for employees through the ACA’s Small Business Health Options Program (SHOP). Then, employees can use SHOP to get health insurance.
If your employer doesn’t offer coverage, you may qualify for:
A spouse’s employer plan
A parent’s plan if you’re under age 26 (or age 30 in some states)
An individual health plan
Extra benefits
Your employer may contribute money (up to account limits) to your HSA, FSA, or HRA to help you save money and pay for healthcare costs. Your employer must offer an FSA or HRA in order to gain access to these accounts.
Employers may also offer extra (“voluntary”) benefits that may help fill in some gaps in insurance, like:
Your employer may also offer wellness incentives and resources to help you deal with personal issues. Employee assistance programs (EAPs) are free, short-term mental health care, well-being, and financial planning benefits. Employers often provide an EAP alongside health insurance. EAPs offer confidential support such as:
Legal services
Financial planning
You and your family members often can use a few EAP services at the same time.
COBRA
If you lose or quit your job, or have another kind of transition, you often can keep your employer health plan for up to 18 months — and sometimes longer. This is called COBRA coverage.
COBRA allows you to continue with your health plan uninterrupted, but it’s very expensive. You have to pay the entire premium cost, instead of only your share. Your employer passes the whole bill onto you, sometimes with an added 2% administrative fee. That can send your monthly premiums soaring, especially if you have family members on your health plan.
Still, using COBRA may make sense sometimes. Examples include:
If you have only a short break before you get new coverage
If you or a covered dependent are having an expensive procedure and don’t want to start over with a new deductible and possibly skimpier coverage
If you need to hang on to other included benefits, such as vision, dental, hearing care, or prescription drug coverage
But ACA coverage may prove the cheaper option.
Common concerns
Many employers offer wellness benefits that help workers to identify and address health risk factors, according to the Kaiser Family Foundation. They include:
Behavioral or lifestyle coaching
Since the start of the pandemic, more employers have increased their offerings to include:
New or expanded online counseling services
Support for wearable devices
Support for the health needs of people working from home
In many cases, you can enroll in Medicare while you’re still working, or you can choose to delay enrollment. You have choices if you or your spouse has job-based coverage through a large employer that has 20 or more workers. You can drop your employer plan and make Medicare your only coverage. Or, you can keep your employer plan and make Medicare your secondary payer. But if you work for an employer with fewer than 20 workers, you’ll have to sign up for Medicare as soon as you’re eligible.
The Family and Medical Leave Act (FMLA) is a federal law that allows eligible workers up to 12 weeks of job-protected unpaid leave per year to care for themselves or a family member with an illness or health condition, or to bond with a new child. It also allows you and your dependents to keep your employer health plan during your leave.
You’re eligible for FMLA if you work for an employer with 50 or more workers. You must have been on the job for at least 12 months, but they don’t have to be in a row.
It can be hard to know which federal and/or state agency regulates your health insurance plan. Many large employers and unions are self-insured. You can start with your employer’s human resources department. You can also file an appeal with your insurer. If your employer group plan falls under the Employee Retirement Income Benefits Security Act (ERISA), you can contact the U.S. Department of Labor Employee Benefits Security Administration at 1-866-275-7922.
References
Federal Register. (n.d.) Ninety-day waiting period limitation.
HealthCare.gov. (n.d.). Full-time employee (FTE).
HealthCare.gov. (n.d.). Minimum value.
Internal Revenue Service. (2022). Questions and answers on employer shared responsibility provisions under the affordable care act.
Kaiser Family Foundation. (n.d.). When can I enroll in my employer health plan?
Kaiser Family Foundation. (2021). 2021 employer health benefits survey.
Kaiser Family Foundation. (2021). Employer health benefits.
Kaiser Family Foundation. (2022). 2022 employer health benefits survey.
National Conference of State Legislatures. (2016). Dependent coverage and age for healthcare benefits.
Nolo. (2021). Is my employer required to provide health care coverage?
U.S. Department of Labor. (n.d.). Continuation of health coverage (COBRA).
U.S. Department of Labor. (n.d.). Health plans and benefits.
U.S. Department of Labor, Employee Benefits Security Administration (n.d.). Ask EBSA.
