Ten Things About American Labor Law（6）Employee Insurance Five insurance and one pension in the U.S.

In our last episode, we broke down the distinctions between employees and contractors, as well as full-time and part-time workers. Many viewers are still reeling from the revelation that both full-time and part-time workers are classified as employees—and now I’ve dropped another bombshell: Employers are not legally required to provide insurance to any employees, whether full-time or part-time. Cue even more shattered worldviews.

So, what types of employee benefits exist in the U.S.? When are employers obligated to provide insurance? And if there’s no legal mandate, why does workplace insurance feel like a standard part of employment?
Today, let’s unravel the complexities of U.S. employee benefits.

10 Things About U.S. Labor Law: Stories of Bosses and Workers
I’m Attorney Liu Xiaoxiao from Silicon Valley, decoding the legal logic behind entrepreneurship.

1. Health Insurance (Health Insurance)

Let’s start with the most common types of employee insurance people think of:

• Health Insurance (Health Insurance): Covers everyday illnesses like headaches, fevers, colds, etc.

• Dental Insurance (Dental Insurance): Includes routine cleanings every six months, fillings, extractions, and other dental procedures (with varying coverage levels).

• Vision Insurance (Vision Insurance): Essential for office workers glued to screens—think annual eye exams, prescription glasses, or contacts.

The Affordable Care Act (ACA)—remember this acronym—is the cornerstone of U.S. healthcare regulations. Under the ACA:

• Companies with 50+ full-time employees must provide health insurance.

• Hitting the 50-employee threshold is no small feat. For startups, this typically happens around Series C funding. Early-stage startups? Forget it—the “employees” are often just the founders and a few unpaid interns.

So, do small businesses need to provide health insurance?

• No. Most small businesses (e.g., local shops, early-stage startups) are exempt.

“But wait—I’ve heard of seed-stage startups offering health insurance!”
This is purely a competitive hiring strategy, not a legal requirement. Let’s be real: Startups often hire young, healthy graduates who’d probably prefer higher pay over symbolic (and rarely used) insurance.

“Does this mean U.S. companies don’t have to provide any insurance?”
Not exactly. There are mandatory insurances, but they’re not what you’d expect. Stay tuned for Part 2.

2. Federally Mandated “Insurance”—The FICA Tax (FICA Tax)

FICA stands for Federal Insurance Contributions Act, which includes two payroll taxes:

• Social Security Tax Withhold

• Medicare Tax Withhold

You’ll notice both terms include “Tax Withhold” because these aren’t “benefits” your employer buys for you—they’re deductions taken directly from your paycheck, with your employer kicking in a matching amount.

Here’s the breakdown:

• Social Security Tax Withheld:

  • 6.2% of your wages is withheld from your paycheck.

  • Your employer pays another 6.2% (total: 12.4%).

• Medicare Tax Withhold:

  • 1.45% is withheld from your paycheck.

  • Your employer matches another 1.45% (total: 2.9%).

But here’s the kicker: These “insurance” programs offer laughably limited coverage:

• Social Security: You can’t touch it until age 62, and even then, it pays out a measly few hundred dollars a month—barely enough for ramen noodles in today’s economy.

• Medicare: Kicks in at age 65, but unless you’re diagnosed with a severe condition like cancer, it’s about as useful as a screen door on a submarine.

3. California Employee Insurance – Payroll Tax

Previously, we discussed federally mandated employee insurance. Now, let’s examine state-level requirements using California as an example. California’s employee insurance is part of the Payroll Tax, which includes four components:

1. Unemployment Insurance Tax
   As the name implies, this provides monthly basic income to eligible individuals who lose their jobs.

2. Employment Training Tax
   Note: This tax does not apply to all workers. It specifically funds vocational training programs in industries like construction, healthcare, and agriculture.

3. State Disability Insurance Tax
   This covers two scenarios:

   • Financial support for workers who become disabled;

   • Paid family leave (including pregnancy leave).

   Fun Fact: Under U.S. law, pregnant individuals are classified as "temporarily disabled" (this is not a joke!). They may obtain a temporary disabled parking placard with a doctor’s certification.

4. California Personal Income Tax
   This standard income tax requires no further explanation.

Why Are These Called "Taxes" Instead of Insurance?

You may have noticed: California’s "employee insurance" programs offer limited benefits—temporary relief for unemployment, pregnancy (unavailable to men), or disability, while the training tax serves niche industries. Despite their names, these function more like mandatory taxes than traditional insurance. Like federal Tax Withheld programs, California’s payroll taxes are deducted at source, yet rarely provide direct personal utility.

4. Workers’ Compensation

The final legally required insurance differs from the above:

• Fully employer-funded (no employee payroll deductions);

• Premiums vary by industry risk level (higher for hazardous fields like construction, lower for low-risk sectors).

10 Things About U.S. Labor Law: Employer vs. Employee
By American lawyer Liu Xiaoxiao and we'll see you next time.