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What to Do When Employer Health Insurance is Unaffordable

Can I Refuse Health Insurance From My Employer and Get Obamacare? 

If your employer offers health insurance but you decide you don’t want to carry it, you can refuse it and get Obamacare instead. Obamacare, also known as the Affordable Care Act, is public health insurance provided to the public through an online marketplace.

All health insurance plans on the marketplace must meet certain guidelines set by the federal government to provide essential health coverage to individuals. If you do choose to refuse your employer-sponsored healthcare and get a marketplace plan, you can be confident that your essential health needs will be covered just as thoroughly. 

Why Employees May Opt Out 

While employer-provided insurance may be the best option for some individuals, these plans may be too expensive to be a reasonable option. Employer-provided insurance plans are usually rated based on the company size, coverage type, and how many employees enroll. These plans may become costly and may offer few options. 

For example, there may be at most one plan to choose from, or the in-network providers may be limited. In these cases, an employee may purchase a plan from the marketplace. Regardless of how an individual decides to go, it is important to know all the options to make the best decision. 

How Does Employer-Sponsored Health Insurance Work? 

An employer-sponsored health insurance plan is a group plan that eligible employees may elect to enroll in for their health insurance coverage. These plans are usually uniform across the company and do not allow employees to choose between plans. The employer will share a portion of the plan’s cost, and the plans are usually offered as individual or family plans. 

If a company has 50 or more full-time employees, they must offer health insurance to be in accordance with Obamacare regulations. If a company provides health insurance, they often offer additional plans, such as dental and vision, as options.


For most companies, an employee must be a full-time employee to be eligible to enroll in the employer-sponsored health plan. Some companies may have a waiting period before an employee can register, such as six months after their hire date. If an employee elects a family plan, the plan will typically cover the employee, their spouse, and their children. 

How Does Marketplace Insurance Work?

Marketplace insurance plans are offered through the Health Insurance Marketplace and meet requirements set forth by the Affordable Care Act (ACA). The ACA mandates that all health insurance plans must provide essential preventative and emergency care services. 

The marketplace plans offer different tiers of coverage, from bronze to platinum. While these plans may differ in services offered, premiums, deductibles, and networks, they must all offer the essential coverages required by the ACA. 


To be eligible for marketplace insurance, someone must be a United States citizen, not be incarcerated, and not be covered by Medicaid. While most individuals can qualify for a marketplace plan, not everyone can qualify for a subsidy, a reduction of premium on the health plan. 


Marketplace subsidies are tax credits offered to individuals who qualify to help reduce their premiums when they purchase the silver-tier health plan. These tax credits are offered to those with a net income less than 400% of the national poverty level. These tax credits are only offered to those who chose the silver tier plan, the most purchased plan on the marketplace. 

The subsidies are also not available to those that have the option of affordable employer-sponsored health coverage. Affordable health insurance is defined as health coverage that is less than 9.12% of the employee’s earnings. If an employee’s health plan would cost more than that, they may be eligible for a subsidy.

Employer-Sponsored Plans vs. Marketplace Insurance

When choosing between an employer-sponsored and marketplace health plan, it is essential to look at all factors, such as affordability, plan options, and portability.


When it comes to cost, it is important to examine each plan carefully and look at all associated costs, not just the monthly premium. With employer-sponsored plans, the company will take on a portion of the cost, and the employee will pay the remainder. With Marketplace plans, the insured individual will pay for the entire plan unless they qualify for a subsidy to reduce the premium.

It is essential to also look at factors such as deductibles and copays. A deductible is an amount the insured will pay out of pocket before the insurance pays out. A copay is an amount the insured is responsible for when a service is rendered. For example, suppose a plan has an 80/20 copay, the insurance plan will pay 80% of the service cost, and the insured will pay the remaining 20%. Looking at all factors of a plan will help to get an understanding of the total out-of-pocket cost.

Plan Options 

When deciding what plan is best for you, it is important to look at all the options each plan offers. While all health insurance plans must meet the minimum requirements set by the ACA, some plans may offer more extensive coverage. Some plans may require the insured to see a specific provider or stay within a network for services to be covered, while others may not. If there is a particular provider that an individual wants to see, it is vital to make sure your plan will provide that coverage.


When it comes to health insurance, being able to keep a plan after an employee leaves a job is referred to as portability. Most of the time, an employee cannot keep an employer-sponsored plan after leaving their job. However, the Consolidated Omnibus Budget Reconciliation Act (COBRA) allows for the continuation of the employer-sponsored coverage for 18 to 36 months. During that period, the insured would be responsible for the full premium as the employer will no longer cover any portion of the premiums. 

If portability is a concern, and you’re not sure you will stay at your current job long, a marketplace plan may be better, as the coverage is not based on employment. 

Should You Opt Out of Employer-Provided Health Insurance? 

An employer-sponsored health insurance plan may not always be the best option for you and your family. Before opting out, however, it is important to consider all the advantages and disadvantages. 

Advantages of Marketplace Insurance 

Consider the following advantages of opting out of employer insurance and finding a plan on the marketplace:

  • More Options: Employer-provided plans offer few different options or choices. Usually, one plan is provided to all employees, and no options for copays, deductibles, or networks. Marketplace plans provide a more comprehensive range of options. 
  • Portability: Opting out of an employer-provided plan may be better if keeping your coverage long term is important to you. A marketplace plan can be renewed with or without you working for a certain employer. 
  • Independence and Control: Opting out of an employer-sponsored plan will give the insured more control over premiums, coverages, and providers. The marketplace is vast, and you’ll be able to have complete control over what plan you choose.

Disadvantages of Marketplace Insurance 

While there are advantages to opting out, there are some disadvantages to consider as well:

  • No Employer Contributions: With a marketplace plan, the employer will not be contributing to the premium. You’ll be required to cover the monthly premium alone.
  • Employer Benefits Package: When an employee opts out of an employee-sponsored plan, they may also lose other benefits such as dental and vision coverage. On the marketplace, you may be required to find separate plans for dental and vision. 
  • Network Changes: Anytime a health plan is dropped or changed, there is a chance that the new plan will cover different providers. This may mean the insured will have to choose a new provider. Your employer-based coverage may offer more stability. 
  • Administrative Complexity: While a marketplace plan allows for more control, it also comes with more responsibility. The insured must choose their plan and deal with complex topics such as network selections and copays. With employer insurance, much of the administration is done for you.

Qualifying for Subsidies If You Decline Employer Coverage 

You may not be eligible for a subsidy if you decline employer coverage. Generally, if an employer offers health insurance, the insured would not be eligible for a subsidy on a marketplace plan. The exception to that is if the employer-sponsored coverage is deemed unaffordable. If an employer-sponsored plan exceeds 9.12% of the employee’s net pay, the employee would then qualify for a subsidy. 

Alternatives to Employer-Sponsored Plans

Besides a marketplace health plan, there are other alternatives to an employer-sponsored plan, such as Medicaid, Medicare, and other employer-funded options. 


Medicaid is a federal health insurance plan for those with low household incomes. While Medicaid is a federal health plan, it is administered at the state level. Each state sets its guidelines for eligibility, such as household income requirements. Medicaid covers preventative care, emergency care, home health services, and prescription medication. Medicaid is a good option for those who qualify because there is usually no premium, and the coverage is extensive. 


Medicare is a federal health insurance program for those aged 65 or over and people with specific disabilities. When an eligible person turns 65, they become automatically eligible for Medicare. Medicare is broken down into parts; Part A and Part B are what is referred to as Original Medicare and would cover services similar to an employer-sponsored plan. For most people, there is no premium for Part A, and Part B’s premium is $164.90 monthly.

If an individual is still working, they can keep their employer-sponsored coverage instead of picking up Medicare. This may be a good option if the premiums and coverages of the employer plan are better than those of Medicare. You can opt for Medicare once the employer plan ceases with no penalty as long as you enroll in Medicare within eight months. 

Other Employer-Funded Options 

Some companies may offer alternatives to traditional health care, like some of the following employer-funded options:

  • Health Reimbursement Arrangement (HRA): An HRA is an employer-sponsored spending account where money is set aside to cover medical expenses and sometimes health insurance premiums. 
  • Health Savings Account (HSA): With an HSA, both the employer and employee can contribute to the account. An HSA also offers certain tax incentives to the employee, and the employee may be able to keep some unused funds of an HSA. 
  • Flexible Spending Account (FSA): An FSA is another account that the employee and the employer can contribute to for health-related expenses. However, the employer owns the FSA, and the employee cannot retain any unused funds. 
  • Defined Contribution Health Plans: With this type of plan, the employer gives each employee a set amount to spend on health-related expenses. 
  • Association Health Plans (AHP): An AHP is a health plan for employees of smaller companies or self-employed individuals to access health insurance by grouping in similar industries to purchase a health insurance plan. 

Putting It All Together 

There are many factors to consider when deciding whether or not to opt out of your employer-sponsored healthcare. It is important to look at the plan’s overall cost, including the premium, copay, and deductible. It is also essential to consider the coverage, the network of doctors, and the plan’s portability.

Another option may be better, such as a marketplace plan. Knowing all the factors to look for will help you make the best decision. 

Frequently Asked Questions

If the employer-sponsored plan does not cover your medical condition, looking at options elsewhere, such as the marketplace, may be best. You may also consider another employer-sponsored health fund, such as an HSA.

Yes. If the IRS deems your employer-provided health plan unaffordable, you may qualify for subsidies on the Silver tier health plan on the marketplace. 

It depends. While you should be able to switch to your spouse’s plan, you may have to wait for open enrollment on their plan or have a qualifying event, such as marriage or loss of insurance coverage, to enroll. 

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