Your Guide To Employer-Provided Health Plans


WRITTEN BY: Craig Sturgill

UPDATED: NOVEMBER 02, 2022 | 1 MIN READ

Companies often offer employee benefits; these benefits may include health insurance. Employer-provided health insurance is usually a group health plan and covers the medical expenses of the employee and, sometimes, their spouse or dependents.

Job-based health insurance features several requirements and differs slightly from individual healthcare plans. Read on to learn more about these health plans.

Employer Provided Health Plans

Americans often have health insurance through their employer because, unlike other countries, the United States lacks universal healthcare. Healthcare plans are also attractive incentives for both employer and employee since they can improve worker retention and ensure employees get the care they need. In 2010, a comprehensive healthcare reform changed guidelines for employer insurance.

The Affordable Care Act (ACA) features the employer mandate or employer-shared responsibility. The mandate requires large employers or companies with 50 or more full-time or full-time equivalent employees to provide health insurance to at least 95% of their workers.

These companies are known as Applicable Large Employers (ALEs). Suppose the company fails to follow the mandate and offers healthcare coverage to a portion of its full-time equivalent employees. In that case, it pays an IRS penalty of $2,750 per full-time employee after the first 30 employees.

What Does the ACA Require from Employer-Provided Health Plans?

The ACA requires all employer-sponsored health insurance to consist of minimum essential coverage. A plan with minimum essential coverage must cover at least 60% of the total costs for the employees’ healthcare.

Employers must also provide a Summary of Benefits and Coverage (SBC), which shows the prices for their employees and what the plan covers.

The SBC will include health coverage scenarios, such as a cost breakdown for a doctor visit or a trip to the emergency room for an X-ray. An employer’s health carrier must supply an SBC when an employee enrolls or renews and if the plan changes.

Other ACA features apply to employer health insurance, including plans covering preventative care at no cost to the employees. The typical coverage amount for an employer is 83% of the monthly premium cost, while employees pay the remaining 17%, according to the Kaiser Family Foundation.

Types of Employer-Provided Health Insurance

Employer-sponsored health plans vary by company offerings. Health insurance premiums vary by employer as well. Companies typically offer one of the following health insurance coverage options:

If employer-provided health insurance covers only an employee, it’s known as a single coverage. A family plan covers family members such as children and spouses. If a plan covers an employee plus one family member, it’s an employee-plus-one plan.

A company may offer Health Reimbursement Arrangements (HRAs) if it doesn’t offer group health insurance. These plans reimburse workers for their healthcare costs, often tax-free if used for qualified medical services.

Employees may then use their HRAs to buy health insurance from the Marketplace or off-exchange with an individual coverage HRA. Another HRA option is the excepted benefit HRA, which reimburses employees up to $1,800 a year for qualified medical services.

Using the Marketplace to Save on Insurance Costs

If the group coverage is too expensive, employees with job-based health insurance may choose an individual Marketplace plan over their employer’s plan. The ACA applies an “affordability standard” to health plans and determines if the plan meets the minimum value standard for the individual, not their dependents.

Employer-sponsored healthcare plans meet the affordability standard if coverage costs 9.61% or less of the employee’s total household income. If a plan is affordable by ACA standards, employees aren’t eligible for a tax subsidy for a Marketplace plan.

If the healthcare plan is more than 9.61% of the household income, the plan fails the affordability standard, and the employee may purchase a plan with a Marketplace premium tax credit.

Employers with fewer than 50 employees may provide their employee’s healthcare with the Small Business Health Options Program (SHOP).

SHOP is an online exchange similar to the public Marketplace where small employers can browse and purchase employees’ health insurance.

SHOP offers employers affordable health, dental and vision care. It doesn’t require an enrollment window, and employers can opt for various plan choices for their employees or select one for them.

Open Enrollment

Employer-sponsored coverage features Open Enrollment, just like Marketplace plans. Open Enrollment is a time window when employees can change their benefit settings, including their health plans.

Most companies offer Open Enrollment in November, picking the same time as the Marketplace, which makes it easy for employees. If an employee has a Qualifying Life Event (QLE), such as the birth of a child or marriage, they may qualify for enrollment outside the Open Enrollment window.

However, Open Enrollment allows employees to change their health insurance options, such as picking a higher deductible plan, if available, or opting for dental and vision care.

COBRA

The Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, is a federal law requiring employers with job-based healthcare plans to offer a continuation of health benefits to employees and their spouses who participate in the plan.

COBRA applies to terminated employees, reduced hours, and other significant changes in employment. COBRA covers previously-covered employee spouses, dependents, and partners.

FAQs

What type of insurance is provided by an employer?

Employers may provide health insurance, disability insurance, worker’s compensation, and sometimes, life insurance.

What is a characteristic of employer-provided health insurance?

Some employers pay entirely for an employee’s health insurance, while other plans rely on employee contributions. Employer-provided health insurance can’t reject coverage due to a worker’s pre-existing condition and can’t limit benefits for the condition.

What are the health benefits provided by the employer?

Employers may provide health benefits such as dental and vision care and a flexible spending account (FSA).

What is employer-sponsored health insurance on w2?

The ACA requires employers to report coverage costs for employer-sponsored group plans on each employee’s W2, Wage, and Tax Statement.

What is the employee’s share of the premium?

Employees typically pay 17% of the premium, with the employer covering the remaining 83% of the cost, according to the Kaiser Family Foundation’s 2021 survey.

Are they the same as employee-sponsored health insurance?

An employer-sponsored health insurance plan differs from an employee’s individual plan because the employer selects the plan and its coverage options.

What is the difference between a high deductible and a low deductible?

Deductibles are the amount you must pay before your insurance company covers your medical expenses. A low deductible typically features a high premium, but you reach your deductible fast, especially if you often visit the doctor or have expensive medication. A high deductible takes longer to reach. Employer-provided healthcare plans often feature deductibles.

What is the difference between employer-sponsored health insurance and individual plans?

You can shop and compare plan options with an individual health insurance plan. When you use employer-provided health insurance, you typically don’t choose your plan, company, or coverage options. Your employer helps cover at least part of the cost of your health insurance with an employer-sponsored plan while you pay for individual insurance on your own.

Finding Affordable Health Insurance

If your employer doesn’t offer health insurance, and you want an affordable healthcare plan for you or your family, it’s easy to find a great plan today. Consider the coverage you need and your budget, then browse various providers’ plans. Start now with our rate comparison tool.