A business doesn’t necessarily need a large workforce to offer group health insurance. In some situations, a company with just one eligible W-2 employee in addition to the owner may be able to establish a small-group health insurance plan.
The exact requirements depend on the type of health plan, the insurance company, how many employees are eligible for coverage, and how many actually enroll.
This is where the question can become confusing for very small businesses. A company with only two or three employees may have access to different types of group health insurance, with eligibility requirements that can vary depending on the type of plan.
Can a Business With Only One Employee Get Group Health Insurance?
In many cases, yes.
For traditional small-group coverage, a business generally needs to have at least one eligible employee beyond the owner. An owner and spouse by themselves generally won’t satisfy the employee requirement for small-business group coverage.
This means a small business doesn’t necessarily need five, ten or twenty employees before group health insurance becomes an option.
A business owner with one or two employees may already be large enough to explore group coverage.
Fully Insured Health Plans for Very Small Businesses
Fully insured small-group health insurance is the traditional arrangement many employers are familiar with. The business purchases coverage from an insurance company and pays a fixed monthly premium based on the employees and dependents enrolled.
Eligibility requirements can vary by state and carrier. For some small-group plans, a business can qualify with one full-time W-2 employee who is not the owner or the owner’s spouse.
There may also be contribution and participation requirements that the employer has to satisfy. These requirements can affect whether a small business qualifies for a particular group health insurance plan.
That’s why the number of people working at the company isn’t always enough to determine whether a business qualifies.
Who the employees are, whether they’re eligible, whether they have other coverage, and how many want to enroll can all matter.
Level-Funded Health Plans May Have Different Requirements
Level-funded health insurance has become another option for many small employers, but the eligibility rules can be different from traditional fully insured coverage.
Some level-funded insurance companies may consider a group with as few as two people enrolling in coverage. In certain situations, one enrollee can be an owner as long as another is an eligible full-time W-2 employee.
Other carriers may require five or more employees to enroll.
Participation requirements can also vary. Depending on the insurance company and plan, the percentage of eligible employees required to participate may be different from the requirements for a fully insured plan.
This is one reason two businesses with the same number of employees may have very different health insurance options.
What If Only One or Two Employees Want Health Insurance?
This comes up frequently with small businesses.
Consider a company with five employees where only two people are interested in joining the health plan. The business may still have options, but we would need to look beyond the total number of employees.
We would want to know how many employees are eligible, why the others aren’t enrolling, whether they have coverage elsewhere, and what participation rules apply to the plans being considered.
An employee covered through a spouse’s health plan, for example, may be treated differently for participation purposes than an eligible employee simply declining coverage.
These details can have a significant effect on which plans are available.
Offering Health Insurance and Being Required to Offer It Are Two Different Questions
There’s another reason this topic can be confusing.
A small business may be eligible to offer group health insurance long before federal law requires the employer to offer coverage.
Under the Affordable Care Act’s employer shared-responsibility provisions, an employer is generally considered an Applicable Large Employer when it averaged at least 50 full-time employees, including full-time-equivalent employees, during the prior calendar year.
Most small businesses fall below that threshold and therefore aren’t subject to the federal employer shared-responsibility provisions.
That doesn’t prevent them from voluntarily offering health insurance.
In fact, a business with only a handful of employees may decide to offer health insurance to help recruit employees, retain its existing team, or provide a more competitive compensation package.
Don’t Assume Your Business Is Too Small for Group Health Insurance
We’ve spoken with business owners who assume they need a certain number of employees before group health insurance is even worth exploring.
That’s not always the case.
A business with only one or two eligible employees may have options. As the number of employees increases, additional plan designs and funding arrangements may become available as well.
The important part is looking at the makeup of the business rather than relying on a single employee number.
If you’re wondering whether your company is large enough to qualify for group health insurance, an employee census can usually provide much of the information needed to determine which options are worth exploring.