When it comes to group health insurance policies, not every group qualifies for coverage. There are specific requirements that must be met in order for a group to be eligible. Understanding which groups do not qualify can help you avoid wasting time applying for group coverage that you will not be able to obtain.
What is a Group Health Insurance Policy?
A group health insurance policy provides coverage to the employees of a company or members of an organization. It allows the risk and cost of health insurance to be spread across a large group, making premiums more affordable than buying individual health insurance.
Group health insurance is typically offered by employers to their employees as part of their benefits package. Other organizations, such as professional associations, unions, and chambers of commerce, can also offer group health insurance to their members.
In order to qualify for a group health insurance policy, the group must meet certain requirements set forth by state laws and the insurance company.
Groups That Do Not Qualify for Group Health Insurance
There are a few main categories of groups that will not qualify for a group health insurance policy:
- Groups without an employment or membership connection
- Groups smaller than the minimum participant requirements
- Some types of small businesses
Let’s take a closer look at each of these.
Groups Without an Employment or Membership Connection
One of the key requirements to qualify for group health insurance is that the group must be formed for a purpose other than obtaining insurance. In other words, there must be an employer-employee or membership relationship connecting the individuals in the group.
Examples of groups that would not qualify due to lack of an employment or membership connection include:
- A group of friends or neighbors who want to get health insurance together
- A group formed by an insurance broker simply for the purpose of buying group health insurance
- Any group formed just to purchase insurance coverage
The individuals must have a common interest, relationship, or purpose apart from obtaining insurance. Otherwise, the insurance company will consider it an artificial group formed only for the purpose of insurance.
Groups Smaller Than the Minimum Participant Requirements
Insurance companies and state laws generally require a minimum number of participants in order to issue a group health insurance policy. This minimum threshold helps balance risk across a large enough group to make the coverage financially feasible for the insurer.
Exact minimum participation requirements vary by state and insurance company, but usually fall in the range of 2 to 50 employees or members. Small businesses with only a handful of employees often fall short of meeting the minimum size requirements.
Some key things to be aware of with participation minimums for group health insurance:
- Most states require at least 2 employees to qualify for small group health insurance
- The minimum participation number may be based on eligible employees, not just those enrolled in the health plan
- Some states require a minimum percentage of eligible employees to participate
Before applying for group health insurance, be sure to check the minimum participation requirements for your state and insurance carrier. Otherwise, you may not meet the qualifications if your group is too small.
Some Types of Small Businesses
Certain types of small business may also not qualify for group health insurance even if they meet the minimum employee requirements. Examples include:
- Sole proprietors or partnerships without any full-time employees
- Businesses with only family members or direct owners as employees
- Independent contractors, self-employed individuals, or 1099 workers
The rules vary by state, but generally the employees counted towards meeting minimum participation requirements must be W-2 employees, not 1099 contractors, temporary workers, or related family members of the business owners.
Be sure to check your state’s regulations and with insurance carriers to confirm eligibility requirements for small businesses and sole proprietors.
Alternatives for Ineligible Groups
If your group does not meet the qualifications for a group health insurance policy, there are some alternatives to explore:
- Association health plans – Health insurance offered through an association or chamber of commerce that you belong to
- Professional employer organizations (PEO) – Contract with a PEO to become co-employer of your workers and qualify for health benefits
- Healthcare sharing ministries – These nonprofit cost-sharing programs are an alternative to traditional insurance
- Individual health insurance – Employees or group members could purchase individual policies if group coverage is not an option
While traditional group health insurance may not be a possibility, reaching out to an independent health insurance agent can help identify alternatives that could work for your specific situation.
Key Takeaways
Here are some key points to remember about which groups do not qualify for group health insurance policies:
- Must have an employment or membership connection – groups formed just for insurance purposes do not qualify
- Size requirements must be met – very small groups may fall short of minimum participation requirements
- Certain small business structures like sole proprietors and partnerships often don’t qualify
- Alternatives like association plans or healthcare sharing ministries may be available
- Consult with an independent agent to review options for non-qualifying groups
Understanding the requirements and which groups do not qualify is an important first step when exploring group health insurance. An independent agent can advise on available options if your group does not meet the qualifications for a standard group policy.
Frequently Asked Questions
Can a group of independent contractors get group health insurance?
Typically not. Most states require group health plan participants to be W-2 employees of a common employer. Independent contractors are generally not eligible for group health insurance since they are self-employed 1099 workers and not employees of the business.
What is the minimum number of employees for a group health insurance plan?
The minimum participation requirements for group health insurance varies by state. Most states require at least 2 employees to be eligible for a small group plan. Some states mandate 75% of eligible employees participate in the group health plan.
Can I offer group health insurance to just one employee?
No. There must be at least 2 W-2 employees enrolled in the group health plan in order to meet minimum participation requirements. A business owner cannot offer group health insurance if they only have one full-time employee.
Can family members be on a group health insurance policy?
Yes, most group health insurance policies allow family members like spouses and children to be added to the employee’s policy. Dependents can typically be covered up to age 26. However, family members are not counted as eligible employees to meet minimum participation requirements.
Is a husband and wife considered a group for health insurance?
No. A husband and wife would not be considered an eligible group to obtain a small group health insurance policy. There must be a connection like an employer-employee relationship. And only W-2 employees count towards meeting the minimum size requirements.
Conclusion
Obtaining health insurance can be challenging for small groups and organizations that don’t meet the qualifications for a standard group policy. Taking the time to understand the requirements and rules for group eligibility will prevent wasted efforts applying for coverage that will ultimately be declined.
Consulting with an independent health insurance agent is highly recommended to review available options if your group does not qualify for traditional group health insurance. Alternatives like association plans or sharing ministries may provide affordable medical coverage even if your group does not meet the minimum requirements for a regular small group health plan.
