Can firms force employees to sign up for costly insurance?
I work for a large trucking company with over 1,100 employees. The main office is in Wisconsin but I’m based in Arizona. They make us sign up for mandatory insurance. It is critical illness insurance. The average weekly charge for it is about $25. How can a company force us to pay for something we don’t want? Is this legal? Yes, this is legal in Arizona. As in most states, employers in Arizona have significant discretion to set the terms and conditions of the working relationship. Employees certainly can negotiate and ask to be excused from any particular term that they do not like or want, and can resign if the employer refuses to concede.
In this case, the company apparently has decided that its employees will be better off if they have certain protection against some of the costs of critical illnesses, to the point of mandating the insurance. That might strike some people as paternalistic, but Arizona law does not prevent the employer from making such a judgment.
Arizona law does prohibit employers from charging workers a fee to get or keep a job. But that law is designed to prevent kickbacks to an employer. It is not generally interpreted to prevent employers from charging for incidental expenses that workers incur in connection with their employment, like the cost of insurance, even though the employer is mandating those expenses.
The worker may take some comfort in the fact that employees may be able to claim the cost of the insurance as a deduction on their federal income tax returns.
It can be important to distinguish between what might seem “fair” and what is “legal.” Some people might think it’s not fair to require that workers purchase something they don’t want, such as this kind of critical illness insurance. But in Arizona, it would not be illegal.
The Affordable Care Act (ACA) requires employers with at least 50 full-time employees working more than 30 hours per week, or the equivalent thereof, to offer their full-time employees health plan coverage, or be assessed a fee of $2,000-$3,000 per fulltime employee, if even just one of them obtains coverage through an exchange. This is sometimes referred to as the “Pay or Play Rule.”
To avoid penalties under the ACA, employees must be provided with affordable minimum essential coverage. An employer-sponsored plan is considered affordable if the employees’ contributions for self-only coverage do not exceed 9.5 percent of their household income for the taxable year. The minimum essential coverage requirement is typically met by employer-sponsored group health plans.
Having more employees participate in a plan may help offset costs and provide your employer with leverage to negotiate more favorable coverage. Even so, critical illness insurance alone does not meet the ACA’s minimum coverage requirements.
Requiring you to pay the $25 each week may even make the costs for essential coverage unaffordable for minimum wage earners and, thus, trigger a penalty under the act.
Moreover, Arizona law prohibits exacting fees from employees as a term of employment, or compelling employees to purchase products from a particular person. Whether charging you for the critical illness insurance fits within the purview of this law is undecided.
Notably, your written consent is needed before any deductions for health insurance are taken out of your wages, and you must receive at least minimum wage.