When Employee Should Consider Waiving the Company’s Medical and When They Should NOT

health insurance

There are always exceptional family or health circumstances that may need consideration before opting in or opting out of the employer-sponsored plan at work.  There is no simple solution when one is dealing with the dynamics of family and health.  The following situations are generalizations based on common questions and issues.  But your case should be considered first and foremost before making a decision.   It is advisable to speak to the benefits broker or human resources for guidance.

Here are some common reasons why employees may wish to waive employer-sponsored coverage.

Medi-CAL:  Medical coverage is offered to families with lower income.  Even with a generous contribution by employers, the monthly deduction for coverage could be cost-prohibitive. Even the most generous employers usually do not contribute to the dependents’ premium.   Employees could face premium deductions of $300 to over $1500 per month to cover a spouse and children.

Coverage on Parent’s Policy:  If you are fortunate enough to have the benefit of your parent’s insurance because you are under the age of 26, take it. Keep in mind that your parents will have to pay a premium for you. You may want to consider reimbursing them for your portion of the premium.  It would be beneficial for you to compare the cost of your Out-of-pocket employer coverage with that of your parents. This is especially beneficial for you to consider if your parents work for a large corporation or institution where the employer contributes to the dependent’s premium.

Medicare:  Employers cannot encourage you to leave the group policy at age 65 to purchase your supplemental.  It may be to your benefit to consider Medicare Part A&B with an added supplemental plan.   This evaluation must be made independent of your employer’s involvement. 

Part B has a monthly premium on a sliding scale based on income ranging from $144.30 to $491.60.  Advantage plans may not have a premium that has benefits and drawbacks.  Supplemental plans have a premium based on the benefit plan and insurance carrier you select.  For example, an attorney earning $150,000 a year left his group policy to obtain Medicare with the highest bracket supplemental plan available to him.  His premium for Medicare Part A, B, D, and the supplemental is approximately $731.60.00 per month compared to $1280. for his group policy with his employer.  The attorney was particularly pleased with the supplemental benefits, which included zero deductible and more coverage, which drastically reduced his out-of-pocket medical costs.

Out-of-pocket, Max is Met:  Maximum Out-of-pocket’s range from $4000 per year per person to $7800 per person per year.  The maximum Out-of-pocket includes the deductible, if any.  If you are currently on an unsubsidized individual plan or other group coverage and have already met your maximum Out-of-pocket, you may consider staying with your current insurance.  This strategy will help you avoid having to reach your maximum Out-of-pocket again.  Keep in mind, deductibles and maximum Out-of-pockets restart January 1 of each year.  You may reconsider joining your employer-sponsored coverage at the renewal on the following year open enrollment.

Here is an example of when to accept the employer coverage or it could cost you more than you expect:

If you are on a subsidized individual plan, Covered California, you may have to accept the employer-sponsored plan.  Once you are eligible for an employer-sponsored plan, you may be automatically disqualified for the Covered California subsidy.  If you are disqualified and continue to receive the tax credit/subsidy, you may have to pay the subsidy back for every month you had access to employer-sponsored coverage. 

For example, Jeremy was on Covered California because the small company he worked for did not offer insurance.  In April, Jeremy went to work for a company that offers medical insurance with a monthly contribution from the employer.  Jeremy was eligible to begin his coverage with the company on June 1.  When offered the insurance option from the employer, Jeremy did the math.  The employer plan would cost him more per month than the individual plan with the Covered California subsidy.  Jeremy waived the employer coverage and decided to stay on Covered California.  When Jeremy filed his taxes the following April, he was hit with a huge tax bill.  He had to pay the subsidy he received from June to December.  Jeremy was no longer eligible for the Covered California subsidy once he was eligible for an employer-sponsored medical plan, regardless of his out-of-pocket premium.*

*Assuming the plan choices meet the ACA affordability threshold eligibility threshold set forth by the IRS.

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