There seems to be some confusion among employers regarding ACA compliance and employee health insurance waivers. The confusion stems from the requirements of the Affordable Care Act (ACA). We intend this post to clear up the confusion for our current clients and those who may choose to use BenefitMall for online payroll in the future.
As you know, the ACA was signed into law 2010. Though the law is incredibly complex, the two provisions that just about everyone is familiar with are the dual mandates for employers and individuals. Under the law, all employers meeting certain criteria are required to offer employees a health insurance plan that meets minimum standards. Individuals are also required to purchase and maintain health insurance unless they qualify for one of a small number of exemptions.
Here's the problem: what does an employer do when an employee attempts to waive health insurance despite the ACA's individual mandate? Can the employer force the employee to purchase the company health insurance plan?
Employees Can Waive Health Insurance
The most important thing to know is that employees do have the legal right to waive health insurance benefits. The ACA does not require individuals to purchase health insurance through their employers. They can choose to purchase health insurance in any way they see fit, as long as they have it.
Having said that, it is usually beneficial for employees to purchase health insurance through their employers in order to take advantage of cheaper group rates. But there are valid reasons for not going this route. For example:
- Spousal Coverage – An employee may be covered under the family policy of a spouse or partner. Purchasing additional insurance would not make sense.
- Family Coverage – Younger workers under the age of 26 can be covered by their parents' health insurance under the ACA. It would be normal for such workers to waive employer sponsored plans.
- Independent Coverage – There are instances in which a worker can get a better policy at a better rate by purchasing on the individual market. This usually affects workers who also run their own businesses on the side. They get a better plan through their own companies.
- Health Sharing Plans – There are a number of health sharing plans that, while not technically health insurance, do qualify under the ACA. A worker may belong to a health sharing plan that is more affordable than the employer sponsored insurance.
As an employer, ACA compliance is really a matter of making sure you are offering a qualifying plan to all eligible workers. You cannot force them to obtain health insurance through your plan, nor should you try.
How to Accommodate Employee Waivers
An employee can only waive health insurance at specific times: at the start of employment, at the next enrollment period, at any point the employer offers a new or changed plan, or when the employee's family status changes. When an employee does attempt to waive coverage, you have certain responsibilities as an employer.
First, you must provide the employee a health insurance waiver form. That form must be completely filled out, signed, and dated. Second, you may not withhold insurance payments from the employee's pay once the waiver form is returned. Third, you must hold on to that form for a least three years. Most employers keep such forms with employee payroll records.
ACA compliance requires employers to offer qualifying health insurance to their workers. But the law does not force workers to purchase the coverage. They can waive health insurance coverage if they qualify for an exemption or have other means of coverage.