Do Companies Have to Offer Health Insurance Coverage?

Companies are not required to offer health insurance coverage to their employees, but many do as a way to attract and retain top talent.

Small businesses with fewer than 50 full-time employees are exempt from the Affordable Care Act's (ACA) requirement to provide health insurance.

In 2019, the ACA reported that about 156 million people received health insurance through their employer.

Some companies, especially those in the tech industry, offer health insurance as a major perk to attract top talent.

Companies have to offer health insurance to their employees under certain circumstances. The Affordable Care Act (ACA) requires employers with 50 or more full-time and/or FTE employees to provide affordable/minimum value medical coverage to their full-time employees and their dependents up to the end of the month in which they turn age 26, or they may be subject to penalties.

The cost of coverage is considered "affordable" if employee contributions for employee-only coverage do not exceed 8.39% of an employee's household income in 2024 and 9.02% in 2025. This percentage is based on the employee's W-2 wages, monthly wages, or the Federal Poverty Level for a single individual.

Employers must treat all employees who average 30 hours a week as full-time employees. This means that if an employee works 30 hours a week, they are considered full-time and must be offered health insurance.

Dependents include children up to age 26, excluding stepchildren and foster children. At least one medical plan option must offer coverage for children through the end of the month in which they reach age 26.

The amount of the penalty depends on whether or not the employer offers coverage to at least 95% of its full-time employees and their dependents. If an employer fails to offer health insurance, they may be subject to penalties.

Here's a summary of the employer mandate coverage requirements since 2016:

If an employer doesn't offer coverage or doesn't offer at least one plan that provides "minimum value" coverage, they'll face penalties.

Employers are required to offer coverage to at least 95% of full-time employees and dependents. The penalty amount for not offering coverage is $2,570 per full-time employee minus the first 30.

There are specific rules for what makes a plan "affordable" and "minimum value." A plan is considered "affordable" if it costs less than 9.78% of an employee's income in 2020 or 9.83% in 2021. A plan is considered "minimum value" if it pays at least 60% of the cost of covered services.

Employers must also offer at least one plan that meets these requirements, or face penalties. The penalty amount for not offering a "minimum value" plan is the lesser of $3,860 per full-time employee receiving a federal subsidy for coverage purchased on the Marketplace, or $2,570 per full-time employee minus the first 30.

Under the Affordable Care Act (ACA), employers with 50 or more full-time employees must provide health insurance to 95% of their full-time employees or face a penalty.

The penalty is quite hefty, at $4,460 per employee per year (in 2024), which gives large employers a strong incentive to provide health coverage.

However, employees have no right to demand health care under the ACA, and employers of any size can refuse to provide health insurance, even if they're not required to by law.

Under the Affordable Care Act, employers with 50 or more full-time employees (or full-time equivalents) must provide health insurance coverage to 95% of their full-time employees. If they fail to meet this requirement, they'll owe a penalty to the IRS.

The penalty for not providing health insurance to the required percentage of employees is quite hefty, standing at $4,460 per employee per year in 2024.

To comply with the ACA, the health insurance must meet minimum requirements for coverage and affordability, and coverage must be extended to the employee's dependents, defined as biological or adopted children under the age of 26.

However, spouses are not considered dependents under the ACA, nor are stepchildren or foster children.

Here are some key ACA rules to keep in mind:

Keep in mind that even smaller companies offer health insurance as a benefit, and the majority of Americans have health insurance coverage through an employer.

Reporting is a crucial aspect of ACA compliance, and it's essential to understand the requirements.

All applicable large employers are required to file an annual report that ensures compliance with the employer mandate.

This report will include information on all employees who were offered and accepted coverage, and the cost of that coverage on a month-by-month basis.

More details on large employer reporting can be found on the Reporting Requirements page.

Companies with 50 or more full-time and/or FTE employees must offer affordable/minimum value medical coverage to their full-time employees and their dependents up to the end of the month in which they turn age 26, or they may be subject to penalties.

To be considered offering coverage, employers must treat all employees who average 30 hours a week as full-time employees. This means that part-time employees who work fewer than 30 hours a week are not considered full-time employees and do not have to be offered coverage.

Dependents include children up to age 26, excluding stepchildren and foster children. At least one medical plan option must offer coverage for children through the end of the month in which they reach age 26.

Spouses are not considered dependents in the legislation, so employers are not required to offer coverage to spouses.

To meet the 95% requirement, employers must offer coverage to at least 95% of their full-time employees and their dependents. Here are some examples of how to calculate this:

Employers must offer coverage to all employees who average 30 hours a week, and they must offer coverage to dependents up to age 26. If an employer offers coverage to more than 95% of its full-time employees and their dependents, they are considered to be offering coverage and are exempt from penalties.

Offering health insurance is not a requirement for employers, but it's highly recommended to attract and retain top talent. In fact, many employers already offered health insurance long before the ACA because of how popular it was among working Americans.

If you have a written employment contract or are a union employee, your employer must provide health insurance as per your agreement. Similarly, if you're offered health insurance in a discriminatory manner, it's against the law.

Employers with 50 or more full-time employees must provide health insurance coverage to 95% of their full-time employees. This requirement is based on the Affordable Care Act, and failure to meet it can result in a penalty to the IRS.

Here are some examples of the 95% requirement:

Note: In each of these examples, the employer must offer coverage to the remaining employees to meet the 95% requirement.

Small businesses with fewer than 50 FTEs don't have to provide health insurance benefits to their employees, but it's still a great idea to offer them.

Attracting employees and retaining top talent is crucial, and 81% of employees believe an employer's benefits package is an important factor in whether they accept a job.

You can create a competitive benefits package that sets you apart from other companies in your industry by offering additional financial assistance through reimbursements.

Having greater access to healthcare also boosts employee productivity and job satisfaction, which can make your organization more effective and profitable.

In most states, small group health insurance is available to organizations with fewer than 50 employees, and you can purchase a plan directly from an insurance company or through a SHOP exchange.

Here are some reasons why offering health insurance benefits is a good idea for small businesses:

Ninety-nine percent of U.S. companies are considered small businesses, which means that a vast majority of employers don't have to offer health coverage.

However, even larger employers with over 50 full-time employees have concluded that it's still cheaper to either not offer full healthcare coverage or to invest in alternative health coverage options, such as a Health Reimbursement Arrangement (HRA).

If you're an employer, you might wonder when you're required to offer health insurance to your employees. The answer depends on a few factors. Your employment contract might require it, in which case you're obligated to follow through on that promise.

If you're a union employee, your collective bargaining agreement could also guarantee health care. Similarly situated employees must be treated the same, so if you're offering health insurance to one group, you can't discriminate against others within that group.

Under the ACA, businesses with 50 or more full-time employees (or the equivalent in part-time employees) are required to offer a company health plan. This includes penalties for failing to comply, which can be significant.

Here are some key facts to consider:

Healthcare coverage must meet certain basic standards, including no dollar limit on ten essential health benefits and coverage of pre-existing conditions with no waiting periods.

If your employment contract requires health insurance, your employer must follow through on that promise. This means if you have a written or oral contract guaranteeing health care, your employer is legally bound to provide it.

Employers with 50 or more full-time employees must provide health insurance coverage to 95% of their full-time employees. If they fail to meet this requirement, they'll owe a penalty to the IRS.

Your employer must offer health insurance to similarly situated employees. This means that within groups of employees, such as full-time or part-time workers, those who are similarly situated must be treated the same.

Employers cannot discriminate in offering health insurance on the basis of certain characteristics, such as race, color, gender, national origin, age, disability, pregnancy, religion, or genetic information. This means it would be illegal for your employer to offer health insurance only to men or only to those under age 40.

Here are some situations where employers are required to offer health insurance:

A health stipend is a great way to help your employees pay for their own healthcare costs. This can be especially helpful for small businesses that can't afford traditional group health insurance.

You can use a health stipend to cover out-of-pocket costs like monthly premiums for health, vision, or dental coverage, doctor's appointments, prescription drugs, over-the-counter medication, and emergency care.

A health stipend works similarly to an HRA, but with fewer regulations and restrictions. However, unlike an HRA, employers can't ask for proof of insurance or receipts for expenses.

No employee eligibility requirements or minimum monthly allowances exist with a health stipend, making it a fully customizable health benefit that can fit any business's needs.

However, if you have 50 or more FTEs, you can't offer a stipend instead of an ICHRA or a group plan.

A health stipend can be taxable, and doesn't satisfy the employer mandate.

For companies that don't have to offer health insurance, there are alternative arrangements that can still provide affordable coverage to employees.

Health reimbursement arrangements (HRAs) are an excellent choice for affordable health coverage. They allow employers to reimburse employees tax-free for qualifying medical expenses.

HRAs are often a better choice for small businesses than traditional group health insurance because they let employees pick the plan and services that suit them best. They can also save employers money compared to group coverage and offer tax benefits.

Some examples of HRA-eligible expenses include monthly premiums for health, vision, and dental coverage, doctor's visits, prescription drugs, over-the-counter medication, chiropractic care, and mental health counseling.

Here are some specific HRA options:

If you're not an ALE and aren't offering health insurance, your employees can get their own individual plan since they won't be eligible for employer-sponsored health coverage.

Group plans are a common way for companies to offer health insurance to their employees. According to the Affordable Care Act, only applicable large employers (ALEs) with at least 50 full-time equivalent employees (FTEs) are subject to the employer mandate.

There are various network types available for group plans, including PPO, HMO, EPO, and POS plans. Employers can choose to purchase a fully-insured group policy from an insurance carrier or implement a self-funded or level-funded plan.

The average annual cost of employer-sponsored health insurance premiums per employee was $25,572 for family coverage and $8,951 for single coverage in 2024. This can be a significant burden for small employers, who may find it unaffordable or too time-consuming to manage.

Here are some common types of group health insurance plans:

These plans can be a good option for companies looking to provide health insurance to their employees, but it's essential to consider the costs and requirements involved.

When registering a business, one of the key factors to consider is the minimum employee requirement for health insurance. This is set at 50 or more full-time employees, which also includes the equivalent in part-time employees.

If you have a business with 50 or more employees, you're required to offer health insurance to those employees. This includes part-time employees, so if you have 100 part-time employees, you'd still need to offer health insurance.

Penalties for not complying with this requirement are significant, with fines ranging from $2,700 to $4,060 per employee in 2021.

Here's a breakdown of the penalties:

Keep in mind that these penalties apply to employers with 50 or more full-time employees, and are meant to encourage businesses to offer health insurance to their employees.

Group plans can be a great option for employers, but it's essential to understand the different types and requirements.

Group health insurance is the traditional option for larger employers, but it may be unaffordable or too time-consuming for small employers to manage.

The average annual cost of employer-sponsored health insurance premiums per employee was $25,572 for family coverage and $8,951 for single coverage in 2024.

You can choose from various network types, including PPO, HMO, EPO, and POS plans.

If you opt for a fully-insured group policy, you can work with an insurance agent or broker to find the right health insurance company for your organization.

Small businesses with fewer than 50 employees (or up to 100 employees in some states) can find a small group health plan through the SHOP marketplaces.

A fully-insured plan means you'll pay a fixed premium to the insurance carrier, while a self-funded or level-funded plan means you'll pay claims out of pocket.

To determine if you're offering coverage to at least 95% of your full-time employees and their dependents, you can use the following examples:

Employers with 50 or more full-time and/or FTE employees must offer affordable/minimum value medical coverage to their full-time employees and their dependents up to the end of the month in which they turn age 26.

Employers with at least 50 full-time employees are subject to the employer mandate, also known as the "play or pay" requirement. This means they must offer affordable health benefits with minimum essential coverage and minimum value to at least 95% of their full-time employees.

If you have fewer than 50 full-time employees, the Affordable Care Act doesn't require you to offer health insurance benefits, but it's still a good idea to consider offering them to boost employee satisfaction and retention.

Employers with employment contracts that guarantee health insurance must follow through on that promise. This applies to both written and oral contracts, as well as collective bargaining agreements.

Under the Health Insurance Portability & Accountability Act (HIPAA), employers that offer group health insurance must offer it to similarly situated employees. This means treating employees within the same group the same, regardless of their full-time or part-time status, length of employment, geographic location, or job position.

Employers cannot discriminate in employment, including benefits, on the basis of race, color, gender, national origin, age, disability, pregnancy, religion, or genetic information. For example, it would be illegal to offer health insurance only to men or only to those under age 40.

Here are the key employee thresholds for health insurance requirements: