Do Employers Have To Offer Health Insurance?

Do Employers Have to Offer Health Insurance?

Updated 9/14/26

Many employees assume that their employer is required to provide health insurance. But federal law does not require every employer to offer health coverage.

Whether an employer has an obligation under federal law depends largely on the size of the employer and the number of full-time employees it has. The Affordable Care Act (ACA) established rules that apply to certain larger employers, while smaller employers generally are not required to provide health insurance.

Do Employers Have to Offer Health Insurance?

No, not all employers are required to offer health insurance.

Under federal law, employers with fewer than 50 full-time employees and full-time equivalent employees generally are not required to provide health insurance to their employees.

Larger employers, however, may be subject to the ACA’s employer shared responsibility provisions. These rules generally apply to employers that qualify as applicable large employers (ALEs).

An employer generally qualifies as an ALE if it had an average of at least 50 full-time employees, including full-time equivalent employees, during the preceding calendar year.

Importantly, the ACA does not simply say that every employer with 50 or more employees must provide health insurance. Instead, an applicable large employer generally must either:

• Offer affordable health insurance that provides minimum value to its full-time employees and their dependents; or
• Potentially pay an employer shared responsibility payment to the IRS.

This is commonly referred to as the ACA’s employer mandate or “pay or play” requirement.

What Counts as a Large Employer Under the ACA?

The ACA’s definition of a large employer is more complicated than simply counting the people who work 40 hours a week.

For purposes of the employer shared responsibility rules, an employer generally determines whether it is an applicable large employer by looking at its average number of full-time employees and full-time equivalents during the previous calendar year.

An employee generally is considered full-time for these purposes if the employee works an average of at least 30 hours per week or 130 hours per month.

Part-time employees can also affect whether an employer reaches the 50-employee threshold because their hours may be combined to calculate full-time equivalents.

For example, an employer could have fewer than 50 people who individually work full-time but still qualify as an applicable large employer after its full-time equivalents are included.

There are also special rules for certain seasonal workers and related employers that must be considered when determining whether an employer is an ALE.

What Does the ACA Require Large Employers to Do?

If an employer is an applicable large employer, it generally must offer minimum essential health coverage to at least 95% of its full-time employees and their dependents to avoid one type of employer shared responsibility payment.

The coverage also generally must be both affordable and provide minimum value for the employees to whom it is offered.

If an ALE does not offer coverage to at least 95% of its full-time employees and their dependents, and at least one full-time employee receives a premium tax credit for Marketplace coverage, the employer may owe an employer shared responsibility payment.

An employer can also face a payment if it offers coverage but the coverage is not affordable or does not provide minimum value and at least one full-time employee receives a premium tax credit.

What Does “Affordable” Health Insurance Mean?

The ACA has specific rules for determining whether employer-sponsored health insurance is affordable.

For 2026, employer coverage generally is considered affordable for an employee when the employee’s required contribution for self-only coverage does not exceed 9.96% of household income, subject to the applicable ACA rules.

Employers generally do not know an employee’s household income, so the IRS provides several affordability safe harbors that employers can use instead.

Affordability is important because an employer may offer health insurance and still potentially face an employer shared responsibility payment if the coverage is too expensive for an employee under the applicable rules.

What Does “Minimum Value” Mean?

Affordable coverage is not enough by itself.

For purposes of the ACA employer rules, the health plan generally must also provide minimum value.

A plan provides minimum value if it is designed to pay at least approximately 60% of the total allowed cost of benefits for a standard population and provides substantial coverage of physician and inpatient hospital services.

Therefore, an employer subject to the ACA’s employer shared responsibility provisions cannot necessarily avoid its obligations simply by offering a very limited or inadequate health plan.

Can a Small Employer Choose Not to Offer Health Insurance?

Yes.

An employer that does not qualify as an applicable large employer generally is not required by federal law to provide health insurance to its employees.

For example, a small business with fewer than 50 full-time employees and full-time equivalents generally can decide whether to offer employer-sponsored health coverage.

HealthCare.gov confirms that small employers that do not qualify as large employers are not required to provide health insurance and generally do not face an ACA penalty simply because they do not offer coverage.

Some small employers nevertheless offer health insurance because it can help them attract and retain employees.

Small employers may also have access to programs such as the Small Business Health Options Program (SHOP) or other health insurance arrangements.

Does an Employer Have to Pay for Health Insurance?

Even when an employer offers health insurance, the employer generally does not have to pay the employee’s entire premium.

Employer-sponsored health insurance commonly involves both employer and employee contributions.

For employers subject to the ACA employer shared responsibility provisions, however, the coverage offered to full-time employees must satisfy the applicable affordability requirements to avoid certain potential penalties.

So there is an important distinction between:

Offering health insurance and paying 100% of the employee’s health insurance premium.

Federal law generally does not require an employer to pay the entire cost of an employee’s health insurance.

Can an Employer Offer Health Insurance to Some Employees but Not Others?

An employer cannot necessarily pick and choose employees without regard to applicable federal rules.

For employers subject to the ACA’s employer shared responsibility provisions, the rules generally concern offers of coverage to full-time employees and their dependents.

Other federal laws can also affect how an employer administers its health plan.

For example, once an employer offers a group health plan, laws governing employee benefits, nondiscrimination, reporting, eligibility, and continuation coverage may apply depending on the employer, plan, and circumstances.

An employer should therefore not assume that it can simply offer health insurance to whichever employees it wants without considering the applicable rules.

How Long Can an Employer Make a New Employee Wait for Health Insurance?

If an employer offers a group health plan, federal law generally prohibits the plan from imposing a waiting period of more than 90 days before an otherwise eligible employee can begin coverage.

The 90-day rule limits the waiting period for eligibility; it does not require every employer to offer health insurance in the first place.

For example, an employer may have a policy under which eligible employees begin coverage after a waiting period, but that waiting period generally cannot exceed 90 days under the federal rules.

Other eligibility requirements can apply, provided they comply with applicable law.

What Happens to Your Health Insurance When You Leave Your Job?

If an employer provides health insurance and you lose that coverage after leaving your job or experiencing another qualifying event, you may have the right to continue the coverage temporarily under COBRA.

COBRA generally applies to private-sector group health plans maintained by employers that had at least 20 employees on more than half of their typical business days during the previous calendar year. It also applies to most state and local government plans.

COBRA does not mean that your former employer has to continue paying your health insurance premiums.

Instead, qualified beneficiaries generally pay the cost of the continuation coverage, subject to the limits established by COBRA.

COBRA is also separate from the question of whether an employer was required to offer health insurance in the first place.

Can State Law Require Employers to Provide Health Insurance?

Federal law is not the only source of employment and insurance requirements.

States can have their own laws concerning employer-sponsored benefits, health insurance, continuation coverage, and other employment-related requirements.

Some state laws may impose requirements that go beyond federal law or provide additional protections.

For that reason, an employee should check the law that applies in the state where the employee works rather than assuming that the federal ACA rules are the only rules that matter.

What If My Employer Does Not Offer Health Insurance?

If your employer does not provide health insurance, you may have other options.

Depending on your circumstances, you may be able to obtain coverage through:

• The Health Insurance Marketplace
• A spouse’s employer-sponsored health plan
• Medicaid
• Medicare
• CHIP
• Another employer-sponsored plan
• COBRA continuation coverage, if you previously had qualifying employer coverage

Losing employer-sponsored coverage can also trigger a Special Enrollment Period for Marketplace coverage in qualifying circumstances.

If your employer does not offer health insurance, that does not necessarily mean you have to go without coverage.

What If My Employer Is Required to Offer Health Insurance but Doesn’t?

If you believe your employer is an applicable large employer and is not complying with the ACA’s employer shared responsibility rules, the situation can be more complicated than simply saying that the employer is “breaking the law.”

The ACA’s employer mandate generally operates through potential tax penalties imposed on applicable large employers.

For example, an ALE that fails to offer minimum essential coverage to at least 95% of its full-time employees and their dependents may face an employer shared responsibility payment if at least one full-time employee receives a premium tax credit.

An ALE can also potentially face a payment when the coverage it offers is unaffordable or does not provide minimum value and an employee receives a premium tax credit.

The IRS generally handles these employer shared responsibility payments.

If you believe your employer is not complying with the ACA, you may want to review your eligibility for coverage, the information provided by your employer, and your Marketplace options. Depending on the circumstances, you may also want to consult an employment attorney or benefits professional.

Bottom Line: Do Employers Have to Offer Health Insurance?

Most employers are not required by federal law to offer health insurance.

The ACA generally applies its employer shared responsibility rules to applicable large employers, which are generally employers that averaged at least 50 full-time employees and full-time equivalents during the preceding calendar year.

These employers generally must offer affordable, minimum-value health coverage to at least 95% of their full-time employees and their dependents or potentially face an employer shared responsibility payment.

Smaller employers generally are not required by federal law to provide health insurance, although they may choose to do so.

And even when an employer offers health insurance, it generally does not have to pay the employee’s entire premium.

Because health insurance requirements can involve federal and state laws, the specific rules that apply to an employee can depend on the employer’s size, the employee’s hours, the type of health plan, the employee’s state, and other circumstances.

Related Articles

If you have questions about employer-sponsored health insurance, these Worker Wisdom articles may also help:

• What Is Employer-Sponsored Health Insurance?
• How Does Health Insurance Through Work Actually Work?
• Can You Decline Employer Health Insurance?
• Can Your Employer Cancel Your Health Insurance?
• When Does Employer Health Insurance Start at a New Job?
• COBRA Insurance Explained
• When Does Employer Health Insurance End?
• What Happens to Your Health Insurance When You Quit?
• Can You Keep Your Health Insurance After Leaving a Job?
• What Happens to Your Health Insurance During FMLA Leave?

Disclaimer

Worker Wisdom provides general educational information about workplace topics, employment laws, and employee rights. This article is not legal, insurance, medical, or financial advice and should not be treated as a substitute for advice from a qualified attorney, insurance professional, HR professional, or government agency.

Health insurance laws and requirements can vary depending on the employer, employee, health plan, state, and individual circumstances. Federal and state laws can also change over time. Always verify the current law and review your specific health plan documents before making decisions about your employment or health insurance coverage.

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Article: Do Employers Have to Offer Health Insurance?