Minimum Participation Requirements for Health Insurance

As a small business, searching for the best way to provide medical coverage to your employees can be tricky. Many employers choose to offer group health insurance, which can mean a lower cost premium than individual plans, often with the exact same coverage and benefits.  How can you tell if your business qualifies for participation in a group health insurance plan? Read on for a comprehensive overview of small group health insurance plans and their minimum participation requirements.

What is Small Group Health Insurance?

In most states, small group health insurance, as opposed to large group health insurance, is a medical insurance plan purchased by companies with 50 or fewer employees. In four states, including California, New York, Colorado, and Vermont, companies that employ 100 or fewer employees are allowed to purchase small group health insurance. Small group health insurance provides the same benefits and coverage options to employees and their dependents that a large group health insurance plan would.

Small group health insurance plans are regulated by the federal government and must be in full compliance with Affordable Care Act rules. The Affordable Care Act provides some great protections to your employees who are insured under a small group plan. For example, your employees’ medical history can’t be used to set their premiums, and older employees can’t be charged more than three times what younger employees are charged in premium costs. Small group plans also, by law, must cover the “essential health benefits” defined by the Affordable Care Act with no dollar limit. Essential health benefits include emergency services, prescription drugs, preventative services, and pregnancy expenses, among other things. 

What are the Small Group Health Insurance Minimum Participation Requirements?

It’s important to determine whether your small business qualifies for small group health insurance before you apply. As you know, depending on your state, you’ll need to have either 100 or fewer or 50 or fewer employees to participate.

Who Counts as an Employee for Small Group Health Insurance?

The owner of the business “counts” toward the number of employees your company has. Per the Affordable Care Act, to qualify for participation, your company also must employ at least one full-time employee that is not the business owner, the owner’s spouse, a family member of the owner, or another partner in the business.

To be considered a “full-time” employee, the otherwise qualifying employee must fall into guidelines set by the IRS. The IRS defines a full-time employee as one who works for the company at least 30 hours per week. If you don’t have a qualifying full-time employee, you can also qualify with “full-time equivalent” employees. Full-time employees are employees who, in combination, work full-time hours. 3 employees working 10 hours a week, for example, would meet the standard for full-time equivalency.

What Percentage of My Employees Must Enroll in Small Group Health Insurance?

Another important requirement for small group health insurance participation is the “70%” rule. In order to participate, you must actually enroll at least 70% of the employees you offer insurance to. Insurance companies have this rule in place in order to avoid “adverse selection,” or a process in which those who are generally healthy tend to not enroll in health insurance plans, making the provision of coverage more expensive for insurance companies.

Employees who already have other coverage do not count toward the 70% marker. Some states have different percentage requirements, but no state currently requires small businesses to enroll more than 75% of their employees.

Health Insurance can be Tricky. Let Benely Simplify Benefits for You.

After learning all about the unique advantages of small group health insurance, you may be considering offering this type of coverage to your employees. When weighing the pros and cons, it always helps to talk to an expert, and Benely is here to help. Contact Benely for assistance in finding the perfect health coverage balance for your employees.