How Many Employees Required for Group Health Insurance?

In most cases, group health insurance is more affordable than purchasing individual plans with the same coverage options and benefits. Though, not everyone is eligible for group health plans. If you are a small business owner, you’ll especially want to know whether or not you qualify before you begin applying for coverage.

Continue reading to find out all you need to know about determining your eligibility for group health insurance, including how many employees are required, who is considered an employee, what small business health insurance is, and more.

What is Group Health Insurance?

While individual health insurance plans are usually purchased by one individual for themselves or their family, group health insurance refers to a single policy that is distributed to members of a group, and oftentimes their dependents. Generally, this ‘group’ is comprised of employees at a company or members of an organization. The major advantage to group health plans is that both the employer and the employees often enjoy reduced insurance rates.

These plans can only be bought by groups and typically require no less than 70% participation by the group members to be effective. Since group health insurance coverage is typically linked to large companies and organizations, many small entities wonder if they qualify.

What is Small Business Health Insurance?

When group plans are bought as small business health insurance plans, this simply means that the company’s employees, in addition to the small business owner, can be covered under the plan purchased by the owner. Small business group health insurance is not available to all businesses, as they must meet distinct criteria outlined by insurance companies and the federal government.

If your small business does meet the requirements to be eligible for small business group health insurance, offering it is an excellent way to attract and retain quality team members. It can also boost morale, productivity, and loyalty among your employees. Not to mention, you’ll likely enjoy lower monthly premiums per individual.

The Definition of a Small Business

In terms of health insurance, a small business typically has no less than one employee. This generally means one owner and one full-time equivalent employee, or common law employee. A common law employee is someone who is not your spouse and works for you at least 30 hours a week. So, this indicates that if your small business just consists of you and your spouse, you likely won’t be eligible for small business group health insurance.

Though, if you have two employees aside from yourself, and one just so happens to be your spouse, you may qualify for a group health insurance plan. In some cases, you may also have to provide proof that you are a small business, in the form of proof of your annual revenue.

How Many Employees Required for Group Health Insurance?

According to federal law, insurance companies must provide small businesses and organizations with group health coverage, regardless of their size. However, there is much more to it than this. To purchase group health insurance, the entity must have at least one employee.

If your company has between one and 50 employees, you can apply for small business group health insurance. If your business has over 50 employees, you’ll need to apply for large group coverage.

What about Types of Employees?

Although you may qualify for group health insurance if you only have one employee, this employee cannot be the owner or employer. In other words, at least one additional employee, who is not the employer, must exist and be registered in the group health insurance plan.

To help put things into perspective, this additional employee cannot be:

• The employer or owner.
• The spouse of the employer or owner of the business.
• Related to the employer or owner.
• A partner of the employer or owner.
• A seasonal employee hired on a temporary basis, even if they’re currently working full time.
• A contractor of the employer or owner, as contractors are usually not considered common law employees since the owner does not dictate how the contractor does his/her job.

Who is Considered an Employee?

As the owner of a small business, you must have a least one employee on payroll to be eligible for group health insurance. More specifically, the IRS requires that your employees be deemed full-time or full-time equivalent. The following are the guidelines put in place by the IRS:

• Full-time employees are workers that are employed under you for at least 30 hours a week.
• Full-time equivalent employees are not considered full-time employees but, when combined, equal the work of a full-time employee. In other words, if you have two employees working 15 hours a week each, they are count as one full-time employee for determining eligibility for group health insurance.

The IRS also requires that your employees pass the common-law test. This means that, as the small business owner, you must have control over the work the employee does and also the method at which the employee goes about doing said work.

Are There Participation Requirements?

To protect themselves, most insurance companies will require organizations and businesses to meet minimum participation requirements in order for their group health plan to be binding. Participation refers to the percentage of full-time employees enrolled in the group health insurance plan. While most states have a requirement of at least 70% participation, this can vary based on both the state and the insurance company you go with.

The following table outlines the states with either higher or lower minimum participation requirements than this percentage:

Insurance Options for Sole Proprietors

If you are a group of one, meaning you are the only person working at your company, you are considered a sole proprietor. While the Affordable Care Act says that insurers cannot deny you coverage based on health status and other factors, this does not mean you qualify for group health insurance.

Even if you consider yourself an employee of your company and take salary, the IRS does not consider self-employed individuals to be eligible for group health plans. In this case, you’ll need to look into individual and/or family health insurance plan options. The same is true if you and your spouse are the only workers at your company.

Taylor Benefits Insurance Agency Can Help!

Wondering if your two-person business qualifies for group health insurance? We can help! Taylor Benefits Insurance Agency has been in the business for more than thirty years and is considered one of the best health insurance brokers in the United States.

Whether you’re located in the Bay Area, or anywhere else in the country, our experienced, professional brokers can help you determine your eligibility and find you the best health insurance plan for you and your employees. Contact us now to learn more and get the process started!