There is no federal or state law that requires employers to provide insurance or any other kinds of benefits to employees. However, there are advantages to employers that offer insurance benefits to their workers. Health care reform legislation signed into law in March 2010 imposes certain guidelines for businesses that do not provide health insurance to employees. Businesses that provide insurance to employees reap an improved ability to recruit talented applicants, increase employee retention and receive tax benefits.
Federal and State Laws
There are no federal or state laws that require businesses to provide health insurance to employees. However, there are state laws concerning workers' compensation insurance. Workers' compensation insurance is paid for by employers to cover work-related injuries and fatalities. Individual state laws mandate workers' compensation coverage. However, the Patient Protection and Affordable Care Act, signed by President Barack Obama in March 2010, amends portions of the Fair Labor Standards Act.
Recruitment and Retention
Regardless of the absence of law, many employers do provide insurance benefits. Employers that offer health insurance are more likely to increase their chances of becoming an employer of choice. Job seekers look for companies with good benefit packages. In addition, employee retention is another reason businesses elect to provide health insurance. Employees may seek opportunities elsewhere if they can get more competitive benefit packages.
Employer Penalties
Effective December 2013, large employers -- those with no less than 200 full-time employees -- are required to offer group health insurance to employees. In the event an employer fails to provide insurance to its employees, Sections 1511 and 1513 of the Affordable Care Act contain provisions that impose a fine of up to $3,000 per year, per employee. Businesses with fewer than 200 employees aren't subject to fines or penalties. However, here is where businesses must make a business decision based, in part, on social responsibility. Small employers are eligible for a health care tax credit when they provide insurance coverage to employees under a group health plan.
COBRA Exception
The only exception to whether businesses are required to provide insurance to employees falls under COBRA regulations. Under COBRA, employers that provide group health insurance benefits must extend continuation of those benefits if an employee is involuntarily or voluntarily terminated. Additional qualifying events render employees eligible for COBRA, including legal separation and divorce. Under COBRA, employees previously covered under a group health plan are required to pay the entire premium for their coverage.
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