Can an employer require employees to participate in the health insurance program?

[katieinny]

An employer offers a health insurance plan and pays 50% of the cost of coverage. He wants to make it a condition of employment that his employees participate (employees pay the other 50%, of course). I can't believe that he can do that, but I thought I would get some opinions from those with more expertise in the health insurance field than I have.

[Alf]

An employer can effectively do it by paying 100% and enrolling everyone, but that doesn't fit your facts. The biggest complaint I can come up with would be state payday acts. Assuming that they are not preempted (we treat them as being effective in the ERISA context), they generally require written authorization from the employee for deductions from pay. If you follow them, they would prevent you from mandating that all employees pay for participation in their plan.

Also, it does not make good sense. What if a spouse has great coverage at their employment with a hugh subsity for family coverage? Why force all of your employees to overpay for inferior coverage that they won't use (from an employee satisfaction perspective that is, I understand why an employer wants to do it for themselvers)?

[mbozek]

An employer can require that employees pay for health care costs (or pensions) as a condition of employment. Under the rules of contract the employee is free to terminate employment, no different then terminating if pay is cut. People forget that under the US system most employees are employees at will who can terminate employment for any reason. I dont see why state law would prevent an employer from imposing a health plan cost on the ees. An employee who did not want to pay for such cost could terminate. The employees can pay for the HC cost from their paycheck or have their salary reduced by the employer- its the same amount of $ to the employer. The only persons who are protected from imposition of this cost are employees covered under a written contract, e.g., union employees.

[katieinny]

Wow, your answer sure surprises me. I could understand it if the employer paid the full cost, but forcing employees to participate -- and pay half the cost just doesn't sit right. So, you're saying that existing employees who don't like the new policy could quit, and of course any new hires would know the rules before they sign on.

I just talked to a person from the NY Dept. of Labor who wasn't able to answer the question.

[david rigby]

Others may have statistics on this, but I understand that many employers require EEs to enroll in the "program", and if you don't elect anything then your coverage defaults to a plan that is ER paid, but with a very high deductible (sometimes referred to as "catastrophic").

[mbozek]

Its no different than other conditions of employment, e.g., employee must be eligible to work in US, hours of employment are 9-5, all truck drivers must have a valid Drivers license, mandatory overtime is required, etc. I dont see why this would be prohibited- Its no different than a reduction of the employee's pay which is permitted under state law.

I wan't surpised that the NY State labor dept cannot answer the Q. NY is the last bastion of pure employment at will and st law only requires consent to payroll reduction. The law does not prevent termination of employment for failure to sign a salary reduction agreeement since the employee can be terminated for any reason other than age, sex, race, religion, etc. if there is no written contract.

[Don Levit]

This discussion is a very interesting one.

Aside from what can legally be done, there is also the "humanitarian" aspect.

On the one hand, I can understand an employer requiring employees to enroll, if they do not have comparable coverage.

There are minimum participation requirements to meet for the group insurance to even be available.

The humanitarian aspect comes into play, when employers and insurers choose to act in ways that make liitle sense.

For example, those insurers that choose to disregard other comparable coverage, and count those employees as eligible to participate, are acting inhumane, in my opinion.

Those employers that require employees with other comparable coverage to enroll anyway, are being inhumane, in my opinion.

Legally, the employer's plan will not violate the nondiscrimination rules if benefits under the plan are offset by benefits paid under another plan.

Ethically, however, if that situation exists, some financial adjustment should be made for those having other coverage which is primary.

Don Levit

[jsb]

I think your state wage and hour laws will control whether or not you can take a mandatory payroll deduction for health insurance (or anything else, for that matter) without signed authorization from the employee. Shouldn't be a problem for NEW hires (from a purely legal, condition of employment perspective), but may be very problematic to impose such a scheme on existing employees. In CA, you could pick up existing unionized employees if it became part of the union contract, but I don't think there would be a way to legally deduct from unrepresented (current) employee payroll without a signed authorization.

Pay $150 (or whatever) per month less salary and make the coverage 100% paid by the employer. Same result.

[mbozek]

Why cant employer impose mandatory contributions as a condition of employment on existing employees any more than reduce their work hours or impose a dress code? St law only requires employees consent to withholding, it doesnt prevent termination if ee refuses to consent to withholding or a change in work hours, etc. This is called employment at will.

As a separate issue ERISA requires that a plan have a funding policy of how contributions are to be made to the plan which can include mandatory employee contributions. SPD must state source of contributions to the plan, er or employee or both.

[oriecat]

Many enrollment forms that I have seen have a statement in the terms that says that by signing the form, the employee agrees to pay any required premiums. So the signed authorization required under state law shouldn't be an issue, unless people are somehow getting enrolled without a form, or the form doesn't include that important wording.