Employee Rules and Rights

Does an employee have to take an employer’s insurance if offered?

No. Employees can join their spouse’s coverage or purchase coverage through the exchange or the individual market. However, when individual responsibility requirements take effect in 2014, an employee will be subject to a penalty if the employee refuses employer coverage and doesn’t obtain coverage on his or her own.

If an employee waives coverage for any reason other than it doesn’t meet the affordability test, the employee can still purchase coverage through the exchange, but will not be eligible for the refundable tax credit.

If an employee’s share of the premium for employer-sponsored coverage meets the law’s definition of unaffordable (i.e., it exceeds 9.5% of the employee’s adjusted gross income), the employee can purchase coverage through the exchange. The employee can’t receive a tax credit unless the employer plan is deemed unaffordable or is inadequate, meaning it does not have an actuarial value of at least 60 percent (as defined by HHS’s essential benefits package).

Whether coverage is adequate and affordable will be determined by the employee’s cost for self-only coverage.

  • Adequacy will be determined with a minimum value calculator to be provided by the IRS and HHS. Employers can input information about the plan, such as deductibles and co-pays, and find out if coverage is adequate.
  • Affordability will be determined by whether the coverage offered costs an employee more than 9.5% of their annual household income. Because employers may not know employees’ household incomes, three affordability safe harbors are proposed:
  1. Form W-2: An employee’s monthly contribution for self-only coverage is affordable if it does not exceed 9.5% of their W-2 wages for that calendar year.
  2. Rate of pay: An employee’s monthly contribution for self-only coverage is affordable if it is no more than 9.5% of their monthly wages (hourly rate of pay × 130 hours, or, for salaried employees, their monthly salary figure).
  3. Federal Poverty Line (FPL): An employee’s monthly contribution for self-only coverage is affordable if it does not exceed 9.5% of the FPL for a single individual.

What is the minimum coverage that everyone is required to carry? Is there a “bare-bones” option?

For most, the minimum coverage will be the standard Bronze benefit package available through the exchange, covering 60% of costs for a standard population.

Catastrophic-only coverage is available through the exchange (but only in the individual market) to those under age 30. It’s also available to those deemed exempt from the individual coverage requirement due to hardship and/or because they can’t find a qualified plan with a premium that costs less than 8% of their adjusted gross income. This option must still cover essential benefits, with at least three annual visits to a primary care physician for preventive care. Catastrophic-only plans will have a large deductible, and cost-sharing will be capped at the out-of-pocket limits under HSAs.

Can employees still waive coverage if not covered under another program?

Employees may waive coverage, but after 2014 they will have to pay the penalty for not having coverage unless they can’t afford the employee share of the premium (more than 8% of their adjusted gross income) and qualify for the individual responsibility exemption. Otherwise, they’ll have to obtain coverage through a spouse, through the exchange or in the individual market.