Understanding Health Insurance: Employer Contributions

Mandatory Health Plans

​Thankfully, when it comes to health insurance, the passing of the Affordable Care Act mandated employer offered health plans. While such a mandate ensures that you will have access to health plans, it does not stipulate that an employer must provide the insurance at no cost to you, the employee. Therefore, most provided policies work through what is known as an employer contribution plan, which means that both you and your employer pay into a health insurance policy, making it more affordable for both parties.
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Employer and Employee Responsibilities

The requirement to offer coverage and any employer offered contributions means that the responsibility of cost is shared. This sharing of costs means that both parties have certain obligations and expectations. It also means that an employer cannot be held accountable for the expense of any additional premiums. Also, the government mandate only extends to persons who are actually employed, meaning that dependents do not have to be covered by an employer policy.
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• Contribution Requirements - Your employer will likely be required to cover at least 50 percent of the premium cost for employees by most insurers and plan providers. This percentage helps to eliminate adverse selection, which can result in higher premiums in the long run.

• Dependents and Premiums - As an employee you are responsible for paying when it comes to dependents. This added expense includes the increase in your premiums for any additional users of your policy. Essentially, while the Affordable Care Act requires employer offered plans, it does not require your employer to pay for nonworkers.

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California Requirements of Employer Contribution

While the health insurance mandate is federal, most states have amended the requirements to meet their state needs, and California is no different. California guidelines are in place to protect both the individual and the business. Therefore, there are two major stipulations for employer contributions and provided health plans: participation and waivers and declines.
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• Participation - While the standard employer contributions are around 50 percent, the expected participation in health plans is around 60 to 70 percent of the workforce. Again, the reason for this requirement is to avoid adverse selection, and to have a balance between healthy and unhealthy individuals enrolled. 

• Waivers and Declines - The participation wavers and declines requirement is meant to help with the small business health insurance requirement. Essentially, employers, when performing the participation calculation, are permitted to remove certain employees from the data set for the small group insurance plans.

If you need assistance understanding employer contributions, or your responsibilities with an employer health care plan, then reach out to Sackett Insurance Services. You can contact us at 1-707-823-3689 or follow us on Facebook, Linkedin and Twitter. Subscribe to our blog for more information on health insurance plans and topics. ​