Can you decline the health insurance plan from the employer?

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You can decline your employer’s health insurance, but think through your budget and options first—individual plans can be pricey, whereas a chunk of the premiums for employer-sponsored plans are paid by the employer. Individual plans might be worth it if your employer’s plan doesn’t meet your needs, like covering certain doctors or benefits, or if you qualify for subsidies that make a Marketplace plan more affordable.

You can find an individual plan through the Healthcare.gov marketplace, directly from a private health insurance company, or through another source, such as Medicare or Medicaid. Some people also get coverage under their spouse’s plan.

Should you get health insurance through your employer?

For most people, employer-sponsored health insurance is the best option because it’s usually more affordable. Employers typically cover a large share of the premium, making these plans cheaper than individual coverage — unless you have specific needs the plan doesn’t meet, such as required doctors or specialists being out of network, limited coverage for certain treatments, or a desire for a leaner plan.

Despite the cost advantages of employer-sponsored plans, some people still need individual coverage. Brian Colburn, senior vice president of corporate development and strategy at Alegeus, says this usually comes down to fit.

“When an employee’s healthcare needs don’t align with what their employer offers — such as needing specific doctors or specialists who are out of network, or wanting a more bare-bones plan — the individual marketplace can be a better option,” Colburn says.

For those who qualify, shopping through Healthcare.gov can be especially important. The ACA marketplace offers income-based subsidies and tax credits that can lower monthly premiums by hundreds of dollars — savings that aren’t available for plans purchased outside the exchange.

If you’re self-employed, between jobs, or your employer plan isn’t considered affordable under ACA rules, an individual ACA plan or a private marketplace option may be the better fit.

Can you decline employer-sponsored health insurance coverage?

Employees are generally not required to enroll in an employer-sponsored health plan. Most employers allow you to skip employer coverage and get insurance elsewhere, such as through a spouse’s plan or an individual policy.

If you opt out of employer-sponsored insurance, your employer may ask you to sign a waiver confirming that you have other qualifying health insurance. This helps the employer document that you’re covered for compliance purposes.

Employees who decline employer-sponsored coverage can usually enroll later during the employer’s next open enrollment period. Enrollment outside that window is typically allowed only after a qualifying life event, such as marriage, the birth of a child, or loss of other coverage.

Once you enroll in an employer plan and payroll deductions begin, you generally can’t cancel coverage midyear unless you experience a qualifying life event.

What happens if you decline employer health insurance?

Declining employer-sponsored coverage doesn’t usually trigger a direct penalty, but it can come with meaningful trade-offs.

Potential consequences to consider include:

Losing employer premium contributions, which can significantly reduce the overall cost of coverage
Ineligibility for ACA subsidies if the employer plan is considered affordable and meets minimum standards
Limited enrollment flexibility, since you may have to wait until the next open enrollment period to join
Risk of being uninsured if alternative coverage falls through

How to formally decline your employer’s health insurance plan

Declining your employer’s health insurance is usually straightforward, but it’s important to follow the correct steps to avoid enrollment issues or coverage gaps.

Review your employer’s enrollment materials. During open enrollment, carefully review your benefits information. Look for instructions on how to waive coverage and confirm deadlines, since missing them could result in automatic enrollment.
Submit a waiver or opt-out form. Most employers require you to formally decline coverage. This may be done online through a benefits portal or by submitting paperwork to HR.
Keep confirmation for your records. After you decline coverage, save any confirmation emails or forms. This helps protect you if there’s a billing or enrollment issue later.
Know when you can enroll again. If you change your mind, you’ll typically have to wait until the next open enrollment period unless you experience a qualifying life event, such as marriage, birth of a child, or loss of other coverage.

When you shouldn’t opt for an employer’s health insurance plan

Here are some situations where opting out of your employer’s group insurance and purchasing your own health insurance might be a better choice.

Your employer’s plan is too pricey. If your employer doesn’t chip in much for premiums, an individual ACA plan, with potential subsidies, might be more affordable.
Your spouse has better coverage. Many people skip their employer’s plan if a spouse offers a cheaper option with better benefits.
The coverage isn’t great. Employer plans must cover at least 60% of medical costs. If yours doesn’t offer solid coverage, it may be worth exploring other options.
You lost your job and got a COBRA offer. COBRA lets you keep your work plan, but you pay the full cost. Losing your job triggers a 60-day special enrollment period to shop for other plans.
Family coverage is too expensive. If premiums for family coverage exceed 9.5% of your income, you won’t get subsidies, but it’s still worth shopping around for a better deal.
Your doctors aren’t in-network. Not all providers accept every plan. If your preferred doctors aren’t covered, you could face higher out-of-pocket costs.

When you should opt in for an employer’s health insurance plan

Your employer pays most of the premium. If your employer covers a large portion of the cost, the plan is likely cheaper than buying coverage on your own.
The plan meets your health needs. If the coverage is solid — reasonable deductibles, copays, and a strong provider network — it can be a good all-around option.
You don’t qualify for ACA subsidies. If your income is too high for tax credits on the marketplace, your employer’s plan may be more cost-effective.
You’re healthy and don’t need many extras. For people without ongoing medical needs, a basic employer plan might offer just the right level of coverage.
It’s easy and automatic. Enrolling through work means no extra paperwork, and premiums come straight out of your paycheck, often pre-tax.

How are group and individual health insurance different?

For employer-sponsored coverage, employers decide on the health insurance company, network, copays and deductibles. This health coverage is only provided to those currently employed and their dependents and isn’t individualized.

However, people may find coverage for individuals and families through the ACA exchange or directly from insurance companies that better fit their needs. That way, they can choose the copays, out-of-pocket costs and benefits that make sense to them, such as a health maintenance organization (HMO) or preferred provider organization (PPO)

Here is how an employer-sponsored plan compares to other health coverage options:

Plan	Pros	Cons
Employer-sponsored health insurance	– Employer helps pay so it can be more affordable than other options – You can usually add your spouse and dependents to the plan	– Limited to your employer’s choices – Coverage is limited to your employment, so if you lose your job, you can get COBRA, which is expensive, or you have to find another plan
ACA plan through the marketplace	– ACA marketplace offers multiple options in most parts of the country – Gives you more flexibility to find a health plan that may fit your needs – If you qualify for subsidies, you may find a plan more affordable than an employer plan	– Without subsidies, ACA plans can be pricey – Most areas have multiple ACA plans of varying benefit design and costs Some parts of the country have limited options – ACA plans often have limited provider networks
Individual plan outside the marketplace	– More choices, but takes some digging to see which plans are offered in your area – You’re not as limited as with other options, but it also requires you to work directly with the insurance company	– No subsidies, so these plans are usually more expensive than ACA plans or employer plans
Medicare	– Multiple Medicare Advantage plans are offered by private insurance companies and Original Medicare – Most have options with different benefit designs and costs	– Must meet age or disability requirements to qualify for Medicare
Medicaid	– Most affordable option – Comprehensive coverage for little to no money – Costs based on your income	– Must meet the income requirements to qualify – Members usually can’t choose between plans – You may have trouble finding providers that accept Medicaid in your area

You can choose to decline your employer’s health insurance, but make sure to carefully evaluate your budget and alternative options before making a decision. Individual health plans can be significantly more expensive than employer-sponsored coverage, especially if your employer contributes to premiums.

However, you might opt for an individual plan if the group coverage doesn’t meet your needs, such as providing insufficient benefits for your medical situation or not covering your preferred doctors.

Frequently asked questions

Can I decline my employer’s health plan midyear?

Once you enroll in an employer-sponsored health plan, you generally can’t drop coverage midyear unless you experience a qualifying life event. Qualifying events may include marriage, divorce, birth or adoption of a child, or losing other health coverage.

If I lose other coverage, can I go back to my employer’s plan?

Losing other health coverage is considered a qualifying life event, which typically allows you to enroll in your employer’s plan outside the normal open enrollment period. You’ll usually need to notify your employer and enroll within a limited timeframe, often 30 days.

Erik Martin

Contributing Researcher

Erik J. Martin is a Chicago-based insurance expert and journalist with 27 years of experience covering insurance, personal finance and real estate. He helps consumers understand complex financial topics—from choosing the right car insurance policy to managing household budgets—through clear, practical guidance.