Participation and contribution rules for group health plans

Why carriers set participation and contribution rules

ACA rules make carriers accept any small employer and ignore health history when they set prices. To keep a group from enrolling only its sickest members, carriers require a minimum share of employees to join and a minimum share of the premium to come from the employer.

Participation

Many carriers want around 70% of eligible employees to enroll. Some ask for less, and rules differ by carrier and plan type.

The good news: employees who turn down your plan because they have other coverage, such as a spouse's employer plan, Medicare or Tricare, usually do not count against you. They are valid waivers.

A worked example. Under one common method, a business with 10 eligible employees, 3 of whom have coverage through a spouse, has 7 employees left to count. At 70%, at least 5 of those 7 need to enroll. Your carrier's method may differ, so we check it before you apply.

Employer contribution

Most carriers want you to pay at least 50% of the employee-only premium. You can pay more, pay a flat dollar amount that clears the minimum, or pay toward family coverage too. Helping with dependent coverage is your call.

Contribution rules apply to your share of the employee's own premium, not to the whole bill. A business paying 60% of employee-only coverage and nothing toward spouses or children still meets a 50% rule. Paying more than the minimum is the most direct way to raise enrollment.

Your share of premiums is a deductible business expense. Employees can pay their share before taxes through a Section 125 premium-only plan.

Falling short: the November 15 to December 15 window

If your group cannot meet participation or contribution minimums, federal rules still let you enroll in a small group plan during a yearly window from November 15 to December 15, with coverage starting January 1. Carriers must waive the minimums for groups that apply in that window.

How rules differ by carrier and plan type

No federal law sets the 70% and 50% figures. Each carrier writes its own rules, and they can differ by state and by plan. Some carriers accept lower participation for very small groups. Level-funded plans often have their own minimums, such as a set number of enrolled employees. Before you apply, we check the exact rules for every carrier we quote, so there are no surprises after your paperwork is in.

Ways to clear the bar

• Raise your contribution. A richer employer share is the fastest way to lift enrollment.
• Offer a lower premium option. A second plan with a lower employee cost brings in people who would waive.
• Collect waivers properly. Have employees with other coverage sign a waiver so they do not count against you.
• Look at other options. An ICHRA or QSEHRA has no participation minimum at all.