Yes, an employee can opt out of your group health insurance; participation is voluntary. Have them sign a written waiver that states the reason, because employees who waive for other coverage (like a spouse’s plan) usually don’t count against the carrier’s participation requirement, while other waivers do.
You’ve done the work of setting up a group health plan for your team, and then one of your employees tells you they don’t want it. Maybe they’re covered through their spouse. Maybe they can’t afford their share of the premium. Maybe they just prefer their current plan. Whatever the reason, the question you’re probably asking is: what do I do now, and does this create a problem for my coverage? The answer depends heavily on why the employee is opting out — and whether you’ve documented it correctly.
Yes, Employees Can Opt Out
Participation in a group health plan is always voluntary. Employees cannot be forced to enroll, and there’s no legal requirement that they accept the coverage you offer. What matters is that the process is handled properly — through a formal written waiver — and that you understand how an opt-out affects your plan’s standing with the carrier.
The most common reasons Florida employees waive group coverage include:
- They’re already covered by a spouse’s employer-sponsored plan
- They’re enrolled in Medicaid or Medicare
- They’re under 26 and still on a parent’s plan
- The employee premium contribution is more than they can afford
- They prefer a different plan they’ve already selected on their own
Each of these scenarios has different implications — both for your participation rate and for the employee’s ability to get help elsewhere.
The Participation Requirement Problem
Most small group health insurance carriers in Florida — Florida Blue, Cigna, UnitedHealthcare, AvMed, and others — require that at least 70% of your eligible employees enroll in the plan. If too many employees opt out, your participation rate falls below that threshold, and the carrier may decline to write or renew your group policy.
Here’s where it gets nuanced, and this is something a lot of small business owners get wrong: not all opt-outs count against your participation rate equally.
Employees who waive coverage because they have other group coverage — specifically a spouse’s employer plan, Medicare, or Medicaid — are typically excluded from the participation calculation entirely. The carrier doesn’t count them as refusing your plan; they count them as already covered. So if you have five employees, two decline because they’re on their spouse’s employer plan, and the other three enroll, your effective participation rate is 100% (three out of three eligible).
Employees who opt out for other reasons — cost, preference for a different plan, general disinterest — typically do count as refusals. Those are the waivers that can sink your participation rate. This is why documenting the reason for each waiver is so important, not just the fact of the waiver itself. For more on eligibility rules, see part-time employee health insurance eligibility.
How to Handle the Waiver Properly
Every employee who declines coverage should sign a formal waiver of coverage — sometimes called a written declination — during your open enrollment period. Most carriers provide a standard waiver form as part of their group enrollment materials. If yours doesn’t, your broker can supply one.
The waiver should include:
- The employee’s full name and date of birth
- The specific plan(s) being declined
- The reason for declining (this is critical for participation calculation purposes)
- The employee’s signature and the date
- A note that declining coverage cannot be reversed until the next open enrollment unless a qualifying life event occurs
Keep these waivers on file. Update them every year during open enrollment. If a carrier audits your group enrollment — which does happen — these documents are your protection.
The Marketplace Subsidy Trap
Here’s a piece of information that affects employees more than business owners, but you should be aware of it anyway because employees will ask. Under the Affordable Care Act, an employee who is offered affordable employer-sponsored coverage cannot receive premium tax credits on the health insurance marketplace.
For 2026, “affordable” means the employee-only premium contribution is no more than 9.96% of the employee’s household income; for 2027 the threshold is 10.22% (IRS Rev. Proc. 2026-26). If your plan meets that affordability standard for a given employee and they waive anyway, they cannot get subsidized coverage on healthcare.gov. They’d have to pay full price for a marketplace plan.
On the other hand, if your plan is genuinely unaffordable for an employee — their share of the premium exceeds 9.96% of their household income in 2026 (10.22% in 2027) — waiving your coverage may make them eligible for subsidized marketplace coverage. This can sometimes be a better financial outcome for lower-wage employees than enrolling in the group plan. Keep in mind the enhanced subsidies expired after 2025, so marketplace credits are only available up to 400% of the federal poverty level. See understanding health insurance subsidies and tax credits.
This is a conversation worth having openly. Some employees don’t realize that declining an affordable plan disqualifies them from marketplace subsidies. Others don’t realize they might qualify for significant financial help if the plan is unaffordable for them specifically.
When Participation Is a Real Problem: Consider ICHRA
If you’re finding that opt-outs are consistently threatening your group plan’s participation threshold, it may be time to reconsider whether a group plan is the right structure for your business at all. An Individual Coverage HRA (ICHRA) sidesteps participation requirements entirely. There’s no minimum enrollment. There’s no carrier threshold to hit. You set a monthly reimbursement amount, employees who want coverage use it, and employees who already have coverage through another source simply don’t submit claims.
For Florida small businesses — particularly in industries with mixed full-time and part-time workforces, or where employee coverage situations vary widely — an ICHRA can be dramatically simpler to manage than a group plan with ongoing participation headaches. Learn more in can I offer different health plans to different employees.
What Happens If an Employee Changes Their Mind
Once an employee waives coverage during open enrollment, they generally cannot enroll mid-year unless they experience a qualifying life event — marriage, divorce, the birth of a child, loss of other coverage, or a change in employment status. This is true for group plans across the board, not just yours.
Make sure employees understand this when they sign the waiver. An employee who waives coverage in November because they’re on their spouse’s plan and then gets divorced in March has a special enrollment period — they’re not locked out. But an employee who waives simply because they didn’t feel like dealing with it and then regrets it in February has to wait until the next open enrollment. Our guide to navigating open enrollment as a small business covers how to time these conversations.
The Bottom Line on Waivers
Employee opt-outs are a normal part of running a group health plan. The key is managing them correctly: get signed waivers, document the reason for each declination, understand which ones count against participation and which don’t, and stay on top of the affordability question for lower-wage employees who might be better served by marketplace coverage.
Frequently Asked Questions
Does an employee waiver hurt my group participation rate?
It depends on the reason. Employees who waive because they have other qualifying coverage, such as a spouse’s employer plan, Medicare, or Medicaid, are usually excluded from the calculation. Waivers for cost or personal preference typically count as refusals. Most Florida carriers want about 70% of eligible employees enrolled, so document every waiver reason.
Can an employee who waives group coverage get marketplace subsidies?
Only if your plan is unaffordable for them or doesn’t meet minimum value. For 2026, coverage is affordable if the employee-only contribution is no more than 9.96% of household income (10.22% in 2027). If it’s affordable and they waive, they pay full price on HealthCare.gov. Household income must also be between 100% and 400% FPL.
Can an employee enroll later after waiving coverage?
Generally only at your next open enrollment or after a qualifying life event, such as marriage, divorce, birth or adoption, or losing other coverage. Losing a spouse’s plan, for example, typically opens a special enrollment window. Simply changing their mind mid-year doesn’t qualify, so explain this before they sign the waiver.
Can I pay employees extra to opt out of group coverage?
Cash-in-lieu arrangements are possible but tricky. An opt-out payment can count toward the employee’s cost when measuring affordability, and it’s taxable wages. Structure it through a Section 125 plan with your broker and tax advisor, and never condition payments on health status or steer higher-risk employees away from the plan.
If you’re a Florida small business owner sorting out participation requirements, waiver documentation, or whether an ICHRA might fit better than your current group plan, get options specific to your workforce and budget. Michael McAllister, owner of Choice Health Insurance Brokers in DeLand, is a licensed broker appointed with 200 carriers (NPN 18229135) and there is no cost to work with him. Call or text 321-230-9536 or visit choice.healthcare to get started.