Practice Areas

ObamaCare FAQ of the Month: What Happens if an Employee Declines Coverage?

April 2014

By: Peter E. Hansen, Esq.

As long as an employer offers employees the opportunity to enroll in its group health plan, then the employer will not be penalized for any employee who decides not to enroll in coverage. The operative word here is offer; generally, large employers (meaning employers that employed an average of at least 50 full-time employees on business days during the preceding calendar year) comply with the Employer Shared Responsibility Mandate by providing eligible employees with an opportunity to enroll in coverage that is affordable and provides minimum value. Of course, the offer must be reasonable - meaning that the offer must be clear and understandable, provide employees with a sufficient amount of time to decide whether to enroll in coverage, and so on.

So, employees are free to decide not to enroll in coverage, but they do so at their own risk. Those who decline an offer of coverage may face a penalty under the Individual Shared Responsibility Mandate unless they obtain coverage from another source, such as the State Health Exchanges or a spouse's group health plan.

Finally, employers should retain a copy of open enrollment materials provided to employees and, when applicable, a signed document acknowledging that the employee was offered coverage and elected not to enroll in the group health plan. This will allow employers to prove compliance with the Employer Shared Responsibility Mandate if necessary; for example, during an audit or to an employee who claims that he or she was not offered coverage.

Questions? Suggestion for a future Obamacare FAQ of the Month? Please contact WS Attorney Peter E. Hansen at (262) 560-9696, or email pehansen@wesselssherman.com .