Can I decline health insurance and pocket the difference?
August 4, 2011 2:51 PM   Subscribe

Can I decline health insurance and pocket what my employer had to pay?

With the changes in health insurance in the US, I can stay on my parent's insurance until I'm 26.

I'm currently a contractor with no health benefits at my current company, but will become full-time soon. I have one more year until I'm 26, can I decline insurance for now and ask the company to reimburse me what they would've paid otherwise?
posted by just.good.enough to Work & Money (17 answers total) 1 user marked this as a favorite
You might not get a second chance to opt into this; I'd figure that out first.
posted by mhoye at 2:54 PM on August 4, 2011

Generally you only get the chance to join work insurance when you get hired, and then once a year, during your work's Open Enrollment period. It's generally in the Fall, but check on exactly when it is, because you really don't want a gap between turning 26 and when you can join your employer-sponsored health care.

That said, more often than not, employers will not pay you what they "would've paid otherwise" Of course you won't have to pay the employee contribution part, and you'll get that, but the part they would have paid usually won't go to you, it will go back into the benefits pot. You can ask your HR person, and it's possible, but unlikely.
posted by brainmouse at 2:57 PM on August 4, 2011

That's not anything I've ever heard of a company doing. You might use it as a negotiating point to ask for a higher salary. Note that it may be cheaper to be covered by your employer than by your parents employer, so talk to them first and compare costs.

After you're hired, Open Enrollment only comes around once a year, unless there's a change of status - no longer being covered by your parents plan would qualify as a change of status at my company.
posted by IanMorr at 2:58 PM on August 4, 2011 [1 favorite]

They'll probably say "no." Every employer I've had has been explicit about that. Remember, the reason they pay for the insurance is because they get a tax break relative to if they just gave you the cash.
posted by SMPA at 2:58 PM on August 4, 2011 [7 favorites]

No way. I would also encourage you to double dip on the health insurance coverage. Seriously.
posted by donovan at 3:39 PM on August 4, 2011

With the changes in health insurance in the US, I can stay on my parent's insurance until I'm 26.

Who is paying for that health insurance? If your parents are paying a large out-of-pocket to have children on their coverage it might be cheaper overall to actually take your work's coverage instead of being a child on your parent's coverage, it might not. Just look at the whole picture.
posted by Mister Fabulous at 3:56 PM on August 4, 2011

That's not anything I've ever heard of a company doing.

I've known places who have done this, given employees some sort of "Here is the amount we would have paid towards your insurance, more or less, and we're giving it to you instead" That said my experience is that it's the exception, not the rule and in some states I don't think you can actually do this at all in some states. Nothing wrong with asking. If you were in Vermont in order to decline insurance you'd have to prove that you had other insurance, but it's different in a lot of places and there's no harm in asking.
posted by jessamyn at 3:59 PM on August 4, 2011

My employer offers a cafeteria plan, and for those who aren't enrolled in the group health insurance (including me because I get better insurance through my spouse) the amount that the employer would otherwise pay for the premium is deposited into the cafeteria plan instead. This plan is only for reimbursing medical expenses (or for childcare if you need it), so it's not just free money, but it does mean I don't have any out of pocket medical expenses, which is great. Ask if they have something similar.
posted by Safiya at 4:01 PM on August 4, 2011 [1 favorite]

I don't know the details of the new law, but you may not be eligible for continued coverage under your parents if you can get coverage through work. I opted out of my own work insurance to take coverage under my husband's policy, and because I declined insurance when it was offered we have to pay a monthly fee back to his company for covering me. Why should your parents (and/or their employer) pay for you if you're eligible for the benefit on your own?
posted by hms71 at 4:57 PM on August 4, 2011 [1 favorite]

Keep in mind the payroll tax benefit SMPA and others have brought up doesn't just apply to your employer: it applies to you too, since employees pay half of payroll taxes. So if your choice were between taking their coverage and buying a similarly priced plan on the market, from a tax perspective you would pay less by taking their plan (though a more comprehensive perspective is always murkier). When you combine that with the perspective Mister Fabulous noted, getting cash for the cost of your plan might not necessarily be the best way to go.

Still, if you're sure you can be insured for the next year by someone else who's happy to pay the cost, and you really want to push for this... not only do some companies have policies which allow it, even if they don't, you can always bring it up when you're negotiating employment terms, and if they really want you or you can sell them on it, you might get it.

To maximize your chances, you'd need to make sure you understand the market value of a similar insurance plan for an individual like you and the value of the plan they're offering you. Then you'd want to make sure that the amount of additional money you're asking for is less than this value by at least the amount of their payroll tax on said value. At that point, there'd be no *economic* reason for them to say no... though they still might say no for any number of other reasons (habit, an inflexible HR or company policy, or they might just not like negotiating).

(You'd probably want to wait to do this until after you'd negotiated something near the salary you wanted, too.)

If it doesn't work out... there are worse things than being double insured (though it can have its own headaches if either insurer gets the idea that the other should be paying for something).
posted by weston at 5:13 PM on August 4, 2011 [1 favorite]

Response by poster: To be clear, I do plan on paying my parents for my coverage. I was just seeing if it was worth considering negotiating.

Scenario 1:
Parents (superior) Insurance
+ Money in my pocket

Scenario 2:
Double coverage until the end of the quarter

Since I only have 7 months until I turn 26 I probably won't bother with scenario 1. My girlfriend, on the other hand, has 1 year and 8 months until she turns 26. Most likely she'll also end up going with scenario 2.

hms71 has a point. Most likely our plans are considered the same as the grandfathered ones so this may all be a moot point.
posted by just.good.enough at 6:04 PM on August 4, 2011

Make sure you find out when open enrolment is for your company plan. If, say, you turn 26 in March and get booted off your parents plan, but open enrolment doesn't start until August, what will you do for health insurance in the "gap"?
posted by media_itoku at 7:09 PM on August 4, 2011

My company offers $150/Month to employees who waive their health insurance (usually because they're already covered by a spouse). The company pays between $450~$1150/Month if an employee takes health insurance coverage (amount depends on single/married/family). So the payment to the employee to waive is much less than the company would pay to cover them. Its really just an incentive not to double dip on insurance. I don't think double dipping really helps (some insurance companies prohibit it I think), so it saves the company money and gives the employee a little cash if they really don't need the insurance.
posted by Long Way To Go at 11:27 PM on August 4, 2011

My company is the same way as Long Way to Gos. They pay me $157.50 a month if I choose to opt out of any health insurance and can provide proof of my own. I worked the numbers every which way and considering all pre-tax post-tax implications, it's still to my benefit to just stick to the employer plan.
posted by amazingstill at 4:04 AM on August 5, 2011

There is no law or regulation that requires an employer to offer cash value to anyone opting out of a benefit plan. Some employers do offer something, others don't.

Should you decline coverage from your employer on the basis that you have other coverage, once you become age 26 and your current coverage terminates, this is a qualifying event. You would typically be eligible to then enroll on your employer coverage mid-year, without penalty, and credit for prior continuous coverage as a special enrollee.

Double check with your employer about special enrollment and credit for prior continuous coverage. It's more than likely you will have to apply within 30 days of when your current coverage terminates. And under no circumstances should you allow more than 63 days to lapse without coverage.
posted by thatguyjeff at 7:08 AM on August 5, 2011

They will not "reimburse you". You can absolutely use choose not to enroll in the insurance and negotiate for a higher salary.
posted by wrok at 7:11 AM on August 5, 2011

Some companies have a "cafeteria plan" where you can choose coverages, and possibly get a rebate, if you show alternate coverage. Companies pay for health care because they want you to be healthy; healthy people are way more productive. If the rebate is small, take the coverage, is my advice.
posted by theora55 at 12:40 PM on August 5, 2011

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