Employer-sponsored health insurance, explained
Coverage through a job is how most Americans under 65 are insured. Here is how it works, and when the Marketplace can be the better deal.
Last checked October 14, 2026 · Written by licensed advisors · Sources are numbered and listed under Notes and sources
What it is
Employer-sponsored health insurance is a plan your employer offers and usually helps pay for. You pay your share out of your paycheck, often before taxes, which lowers what it really costs you. Your spouse and children can usually be added for a higher premium.1
- Your employer picks the plan
- It usually helps pay
- Your share comes out of your paycheck, often before taxes
- Spouse and children can usually be added
Can you use the Marketplace instead?
You can always buy a Marketplace plan. The question is whether you can get a tax credit for it. If your job offers coverage that counts as affordable and meets a minimum standard, you can’t get the credit, so you would pay the full Marketplace price.
Coverage counts as affordable when your share of the cheapest employee-only plan stays under a set percentage of your household income, which the IRS updates each year. Since 2023, your family members are judged on the cost of family coverage, so they may qualify for a credit even when you don’t.234
The downsides
You don’t choose the insurer or the network; your employer does. If you leave the job, the coverage ends, and keeping it through COBRA means paying the full price yourself. And a plan that is affordable for you can still be expensive for your family.5
- Your employer picks the insurer and network
- Coverage ends when the job ends
- COBRA means paying the full price
- Affordable for you can still be costly for your family
If you run a business
You can offer a small group plan, or reimburse employees for their own individual plans through an ICHRA or, for small employers, a QSEHRA. Each works differently for taxes and for your employees’ tax credits.67
- You offer one plan to your employees
- You reimburse employees for their own individual plans
- Reimbursement for small employers
What to do: Thinking about covering your team? We compare a group plan with the reimbursement options for your headcount.
Related guides
Obamacare Hotline and/or Medicare Po Polsku are private companies not affiliated with any local, state, or federal government agency. This guide is general information, not tax or legal advice.