Can I Decline Health Insurance From My Employer?

Health insurance is commonly offered as an employee benefit by many companies. But in some cases, employees may want to opt out and decline coverage through their employer. So can you actually decline health insurance offered by your employer?

The short answer is yes – employees can refuse employer health insurance coverage and waive participation in the company plan. There are a few key things to understand about declining coverage from your employer’s plan.

Overview of Declining Employer Health Insurance

Here is a quick overview of what it means to decline insurance from your employer:

  • Employees can opt out of employer health plans during open enrollment or for qualifying events.

  • To decline, employees must complete a waiver of coverage form through HR. This is kept on file.

  • The company will not deduct medical insurance premiums from the paycheck.

  • The employee forfeits healthcare coverage and benefits through that employer.

  • The employee may seek individual health insurance or enroll under a spouse’s plan.

  • There is no penalty for declining an employer’s health plan. It is a voluntary benefit.

  • Employees who initially waive may enroll later if a qualifying event occurs.

Employees have the right to refuse their company health insurance. But it means forfeiting that coverage and benefits. Reasons for declining must be weighed carefully.

Reasons Employees Decline Employer Health Plans

Why would someone choose to opt out of health insurance provided by their employer? There are a few scenarios where declining might make sense:

  • Spouse’s coverage – The employee’s spouse has a plan they can join. This may provide better or cheaper coverage for their situation.

  • Parent’s plan – Young adults under 26 can sometimes stay on a parent’s health insurance. This may be preferred.

  • Medicaid eligibility – Lower income employees may qualify for Medicaid based on income. Medicaid may have lower out-of-pocket costs.

  • VA health benefits – Veterans may have coverage through Veteran Affairs benefits and prefer using VA healthcare over private insurance.

  • COBRA extension – Employees extending previous coverage under COBRA may wish to finish their COBRA term before switching.

  • Union insurance – Some union workers get health insurance negotiated through their union rather than standard employer plans.

  • Personal reasons – Some may simply prefer selecting their own individual plans for personal reasons or unique needs.

As you can see, there are a variety of potential reasons for declining coverage. The employee should ensure they have alternate coverage before waiving employer insurance.

How To Decline Employer Health Insurance

If an employee decides they do not want the health insurance offered by their company, how does the process work? Here are the typical steps:

  • Wait for open enrollment – Employees can only decline health insurance during open enrollment or for qualifying events like marriage or divorce.

  • Check plan options – Review the company’s health plan options closely before declining. Understand what is covered and the costs.

  • Discuss decision – Speak with HR representatives if you have questions about waiving the employer plan. Understand the implications.

  • Obtain forms – Ask for health insurance waiver or declination forms from your company’s HR department.

  • Complete forms – Fill out waiver forms fully. Forms will require personal details, dependents, and reason for declining. Sign and date.

  • Submit paperwork – Return completed health insurance declination paperwork to your HR or benefits team. Meet any enrollment deadlines.

  • Find alternate coverage – Before waiving employer insurance, make sure you have alternative coverage lined up through individual, spouse, parent or other plans.

Following these steps will allow you to properly opt out of health insurance provided by your employer. Reach out to HR with any questions.

What Happens When You Decline Insurance?

What happens after formally declining the health insurance offered by your employer? Here are some key points:

  • No premium deductions – The company will not deduct medical insurance premiums from your paycheck since you are not enrolled.

  • No plan coverage – You forfeit being covered under or using the employer’s group health plan for care and prescriptions.

  • Potential plan penalties – If you later wish to enroll, some plans charge penalties or waiting periods if you initially declined.

  • Enroll during open enrollment – To enroll down the road, you must wait for the next open enrollment period unless a special qualifying event occurs.

  • Show proof of alternate coverage – Your company may require you to show proof you have other coverage if insurance is mandatory for your work.

  • Pay Individual plan premiums – If enrolling in an individual plan, you must pay your own premiums directly to that insurer.

Be certain you understand the implications before moving forward with declining employer health insurance. It can impact your coverage options and costs down the road.

Can I Get Insurance Elsewhere If I Decline?

A common question is whether you can get health insurance somewhere else if you decline coverage from your employer. In most cases, the answer is yes:

  • Through spouse – Get added to your spouse’s employer-provided plan or group insurance. This is common when one spouse declines their own coverage.

  • Individual private plan – Buy a health insurance policy directly from a provider or the plans. Shop for plans that fit your needs and budget.

  • COBRA extension – Continue your previous employer’s plan for up to 18 months under COBRA rights. You pay full premiums.

  • Parent’s plan – Young adults under 26 can often remain insured under their parent’s health plan as a dependent.

  • Medicaid – Those with lower incomes may qualify for Medicaid public health coverage based on your state’s eligibility rules.

  • VA/TRICARE – Veterans and active military personnel have access to VA and TRICARE health benefits outside of civilian employer plans.

As long as you do your research and enroll properly, there are alternate options for getting health insurance if declining your employer’s offerings.

Things To Know About Declining Employer Health Insurance

Before deciding whether to decline coverage from your employer, be sure you understand these key points:

  • You must complete the official waiver paperwork through HR – verbal notice is not enough.

  • Review your employer’s plan closely before opting out so you know what you are giving up.

  • You generally cannot enroll again until the next open enrollment unless you have a major life event.

  • Research carefully to find suitable alternate individual or group health insurance.

  • Be aware of any deadlines and look ahead to make a thoughtful decision during open enrollment.

  • Declining affordable employer coverage may impact eligibility for Premium Tax Credits on the individual exchange.

  • Your employer may charge you more or impose waiting periods if you later re-enroll after initially declining.

Take time to make an informed choice. Declining health insurance is straightforward but has important coverage and cost impacts for your personal situation.

Frequently Asked Questions

Here are some common questions that come up regarding declining employer health insurance plans:

Can my employer force me to take their health insurance?

No, it is voluntary. You cannot be required to enroll in an employer health plan. But declining may not be the best choice financially in all cases.

What if I change my mind after declining coverage?

You typically must wait until the next open enrollment unless you have a major qualifying life event like marriage, divorce, or job loss. Some costs may be higher if re-enrolling.

Is there a tax penalty for opting out of my employer’s insurance?

There is no direct tax penalty. However, you may not qualify for premium tax credits on plans if your employer offered affordable coverage.

What paperwork do I need to provide if I decline coverage?

You must complete your employer’s official forms to decline coverage. This includes personal details, reason for declining, and signature. Verbal notice is not sufficient.

Can I still use flexible spending accounts if I waive the health insurance?

Typically no – you usually must be enrolled in your employer’s health plan to contribute to a linked flexible spending account (FSA) for healthcare costs.

Carefully weighing whether to decline employer health insurance is an important personal decision with financial impacts. Be sure you take the time to explore your options and make the best choice for your situation.

Can I Decline My Employer’s Health Insurance?


Can I ask for money instead of health insurance?

It is legal to offer employees cash in lieu of health plan benefits, but it has to be done appropriately through a cafeteria plan that includes a “cash-in-lieu” agreement.

Can you decline health insurance for a higher salary?

Some companies do allow this. If you refuse the health coverage they give you something in return. Offers that I have seen, though I was not interested in them because I needed the insurance for my family), include: The amount of money the company would have paid for their portion of the premium.

Can I use Obamacare instead of employer insurance?

Maybe because of the cost or the types of plans available, you want to look elsewhere. And what if you are interested in enrolling in an Obamacare plan through the online Marketplace. Is this even an option? Short answer: Yes.

What does decline coverage mean?

Decline, in the context of insurance, refers to the rejection of the request for insurance coverage. An insurance company commonly declines an insurance application if the business or the person applying represents too high of a risk for the insurance company to pay out too much money.

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