Coverage for Employees of a Large Employer

More than half of Americans under age 65 have coverage through an employer-sponsored plan. For most people enrolled in a plan sponsored by a large employer, the coverage is relatively affordable and comprehensive. As a result, the Affordable Care Act insurance reforms focus on coverage in the individual and small group markets, where historically there have been more problems with access to affordable, adequate coverage. However, some reforms apply broadly to all group health plans, including large employers (firms with 51 or more employees). For reforms that apply to small employers (generally those with fewer than 50 employees), see Coverage for Employees of a Small Employer.

For more information on consumer protections that apply to employer-sponsored coverage — based on factors such as the size of the company, whether the plan is self-insured or fully-insured, and whether the plan is a grandfathered plan or new — refer to ACA Consumer Protections for Private Coverage.

Premium Tax Credits and Employer-Sponsored Coverage. Most people enrolled in coverage, or with an offer of employer-sponsored coverage, will not be eligible for premium tax credits on the Marketplace unless their employer plan is inadequate and not affordable. Specifically, to be eligible for premium tax credits, the employer-sponsored coverage must be “unaffordable” or fail to meet minimum value standards (i.e., considered “inadequate”). To be unaffordable, the cost of self-only coverage in the employer’s lowest cost plan must be more than 8.39 percent of the individual’s household income in 2024. To fail to provide minimum value, the plan must have an actuarial value of less than 60 percent, meaning that the plan covers less than 60 percent of the total average costs for covered benefits, including hospitalization and physician services. If the individual’s employer-sponsored coverage fails either test, the individual may be eligible for a premium tax credit for a plan purchased in a health insurance Marketplace. See Eligibility for Premium Tax Credits and Cost-Sharing Reductions.

Enrolling in Employer-Sponsored Coverage. Employers cannot use health factors to determine an employee's eligibility for health benefits or premiums. However, employers are allowed to establish different health benefits or eligibility rules for different categories of employees (such as salaried workers vs. hourly workers). Under the Affordable Care Act, employers are allowed to impose a waiting period for health benefits for new employees of no more than 90 days.

Employers typically have an annual open enrollment period that gives employees an opportunity to change plans or add dependents. However, there are circumstances under which employees may enroll in coverage or add dependents outside an annual open enrollment period. For example, if a worker loses coverage under his or her spouse’s plan, or has a new child by birth or adoption, he or she can enroll in the employer-sponsored plan or add new dependents, so long as he or she does so within 60 days of their change of circumstances.

Employer plans, as well as all health plans, must provide individuals with a Summary of Benefits and Coverage, which uses a standard format to outline the benefits, cost-sharing and coverage limits of plans. The Summary of Benefits and Coverage must also state whether the plan meets minimum value and counts as minimum essential coverage. The Summary of Benefits and Coverage must be made available to consumers at open enrollment and upon renewal of coverage, upon request, and whenever there is a significant change in the plan. This can be an important tool for consumers to understand their plan options in employer-sponsored coverage or who want to compare plan benefits and costs for employer coverage to coverage in a health insurance Marketplace.

Employers must also provide each employee with a Summary Plan Description within 90 days after they become a participant in a plan. The Summary Plan Description must contain information on benefits, eligibility for benefits, plan limits, and whether the health plan is fully insured or self-insured. However, it doesn’t have to be presented in a standard format, and only has to be provided after the employee enrolls in the plan, so it is not useful for comparing plan choices prior to enrollment.

Under the Affordable Care Act, grandfathered health plans are exempt from some, but not all of the market reform provisions. Grandfathered status applies to health plans that were in place on March 23, 2010 and continuously covered at least one person since then. If health plans make certain changes like decreasing benefits or coverage, they can lose their grandfathered status.

All non-grandfathered employer-based plans must cover recommended preventive services with no cost-sharing. Employer plans must have a cap on annual out-of-pocket costs: in 2024, $9,450 for individuals, $18,900 for family coverage. In addition, employer plans cannot impose annual or lifetime dollar limits on covered “essential health benefits." The scope of those essential health benefits is determined by your state, but would generally cover categories of services such as doctor visits, hospitalization, maternity and newborn care, prescription drugs, laboratory services, mental health and substance use disorder services, rehabilitative and habilitative services, and pediatric care. Note that large employer plans are not required to cover the essential health benefits, but to the extent they do cover them, they cannot impose an annual or lifetime dollar cap.

Employers cannot set premiums for their employees based on their health status, although there is an exception to this prohibition for “non-discriminatory wellness programs.” Employers can modify premiums and/or cost-sharing in an amount up to 30 percent of the total premium (including the employer’s contribution to the premium) for workplace wellness programs, and up to 50 percent for programs that target tobacco cessation. The financial incentives can be applied as a discount (e.g., lower premiums or deductibles) or as a penalty (higher premiums and deductibles), as long as the programs meet federal rules for being non-discriminatory.

Employer-sponsored Health Reimbursement Arrangements (HRAs). Some employers may offer employees an HRA in lieu of or in addition to a group health plan. An HRA is an employer-funded tax-preferred account for employees to use to purchase insurance on the individual market. An “individual coverage” HRA would allow employees to use the account to pay for premiums or other medical expenses associated with an individual plan that meets Affordable Care Act requirements. Employers can also offer a second type of HRA, called an “excepted benefit” HRA, which allows employees to use an HRA funded with no more than $2,100 annually to buy certain ancillary insurance products (such as dental or vision coverage) or a short-term plan that is not subject to Affordable Care Act standards. See this FAQ for more information.

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