Do I Have to Accept Employer Offered Health Insurance?

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Although no one can force you to purchase employer-offered or any other type of health insurance, the consequences of either turning it down or opting out may be more than you can afford.

Choices and Consequences

Turning down or opting out of employer-offered group health insurance leaves you with two alternatives: to purchase individual insurance through the health insurance marketplace or a private insurer or to remain uninsured. Both can have significant financial consequences.

Marketplace and Private Health Insurance

Marketplace and private insurance plans are usually more expensive than work-based insurance. For one thing, you’ll lose employer subsidies designed to reduce your monthly premium payments. For another thing, turning down group insurance means that in most cases you won’t qualify for the refundable tax credit offered with marketplace plans. The consequence in most cases is being responsible for paying the entire monthly premium bill on your own.

Being Uninsured

Opting out of health insurance entirely is even more costly. In addition to taking the chance that one illness or injury could be financially devastating, the 2010 Patient Protection and Affordable Care Act includes an individual mandate. If you turn down or opt out of group insurance, you must purchase individual insurance or pay a penalty fee for each full month that you or a family member remains uninsured.

The maximum penalty for individuals and families depends on annual income. According to Obamacare Facts, an individual or family with an annual income of about $48,750 or less pays a flat fee. As of the date of publication, the maximum penalty for an adult is $325, $162.50 for a child and up to $975 per household. Those with higher incomes pay a penalty fee equal to 2 percent of their annual income.

An Exception to the Rule

Although work-based insurance is usually the best choice, an insurance plan that fails the affordability test may make opting out or turning it down and purchasing insurance through the marketplace a wise decision.

An insurance plan in which your share of the premium for an individual plan is more than 9.56 percent of your household income is technically unaffordable. In this case, you may qualify for the federal tax subsidy and pay less than you would with the group plan. It doesn’t matter whether you have individual or family coverage; the point of reference is the cost of an individual plan.

For example, if your household income is $50,000, the annual cost of an individual plan would have to be $4,780 or higher to make you eligible for the federal tax credit.

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