Do Employers Have to Provide Health Insurance?

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Although many employers make health insurance available to employees as a fringe benefit, such a policy is not mandatory. Employees who want to work for a company that allows them to buy health insurance through a group plan should discuss the benefits package with their prospective employer before accepting a job.


No federal or state law requires private employers to offer health insurance to employees, or to spouses and dependents of employees. This is scheduled to change in 2014 as part of the new health care law. Until then, the decision to offer health insurance is up to the employer. According to, 61 percent of Americans under age 65 received employer-based health coverage in 2007.


Although laws do not require employers to offer health insurance, most states have mandates for what health plans must include in their policies. The mandates vary by state, but some of the common inclusions are treatment for alcoholism and substance abuse, breast reconstruction, diabetic supplies, emergency services, mammography, maternity minimum hospital stays, visits to an optometrist and visits to a psychologist.


From 2008 to 2010, according to, more than 50 percent of small businesses -- generally defined as businesses with fewer than 50 employees -- that offered health insurance reported switching plans with the effect of creating higher out-of-pocket costs for employees. The primary factor was rising premiums, according to the website. Still other small businesses switched to plans that covered fewer services, and others dropped coverage altogether.

Benefits presents a case that employers, especially small business owners, benefit from offering health insurance to employees. Offering health insurance aids in employee recruitment and retention and increases productivity. Small businesses suffer more than other businesses when workers go on sick leave that might result from a lack of access to preventive health services.


The Affordable Care Act of 2010 immediately tightens regulations for existing employer group plans. Bigger changes arrive in 2014, most notably a federal mandate for employers with 50 or more employees to provide health insurance or pay a penalty. Such employers must annually pay a fine of $2,000 per full-time employee, although the government will waive the penalty for the first 30 employees. Employers also might have to pay fines if their coverage does not meet certain standards. For example, the employer must pay for at least 60 percent of the actuarial value of the plan's benefits, and no employee must have to pay more than 9.5 percent of his household's income in premiums.