What Qualifies as a Large Group Health Plan?

Health insurance plans vary significantly, with different regulations and requirements applying based on the size of the group covered. Group health plans, offered by employers to their employees, represent a common avenue for obtaining coverage. These plans pool individuals, often leading to different structures and rules compared to individual health insurance policies. Understanding what constitutes a “large group” health plan is important.

Defining a Large Group Health Plan

A health plan is considered “large group” based on the definition of an Applicable Large Employer (ALE) as outlined by the Affordable Care Act (ACA). An employer qualifies as an ALE if they employed, on average, at least 50 full-time employees, including full-time equivalent (FTE) employees, during the preceding calendar year. This assessment is crucial for determining an employer’s obligations under federal health care law.

A full-time employee, for ACA purposes, is defined as an individual who works at least 30 hours per week or 130 hours per month. To calculate FTEs, employers must aggregate the hours worked by part-time employees. The total number of hours worked by all part-time employees in a month is divided by 120, and the resulting figure represents the number of full-time equivalent employees.

ALE status uses the average workforce size from the prior year. This calculation includes combining the full-time and FTE counts from all related entities that are part of a controlled group for ACA purposes. Seasonal employees are not counted towards the 50-employee threshold if they are employed for 120 days or fewer during the calendar year.

Regulatory Framework for Large Group Plans

Large group health plans operate within a federal regulatory landscape, which distinguishes them from small group or individual plans. The Affordable Care Act (ACA) introduced provisions directly impacting large employers, particularly through its employer shared responsibility provisions and reporting requirements.

The Employee Retirement Income Security Act (ERISA) of 1974 governs most private-sector employee benefit plans, including group health plans. ERISA establishes standards for plan administration, fiduciary duties, and disclosure requirements. The Consolidated Omnibus Budget Reconciliation Act (COBRA) mandates that group health plans offer temporary continuation of coverage to employees and their families after qualifying events. COBRA applies to employers with 20 or more employees in the prior year.

The Health Insurance Portability and Accountability Act (HIPAA) of 1996 includes provisions relevant to large group plans. HIPAA addresses health coverage portability, limits pre-existing condition exclusions, and establishes national standards for the protection of patient health information. These federal laws collectively create a regulatory environment for large group health plans.

Employer Responsibilities for Large Group Plans

Once an employer is identified as an Applicable Large Employer (ALE), obligations arise concerning the health coverage offered to employees. ALEs are required to offer minimum essential coverage (MEC) to at least 95% of their full-time employees and their dependents up to age 26. MEC includes health plans that meet baseline standards for coverage.

The offered coverage must also be “affordable” and provide “minimum value.” For plan years beginning in 2025, coverage is considered affordable if the employee’s required contribution for the lowest-cost, self-only coverage does not exceed 9.02% of their household income. A plan provides minimum value if it covers at least 60% of the total allowed costs of benefits for a standard population and includes substantial coverage for physician and inpatient hospital services.

ALEs are subject to reporting requirements to the Internal Revenue Service (IRS) to demonstrate compliance. This includes filing Forms 1094-C and 1095-C annually. Form 1094-C serves as a transmittal form, summarizing the information from individual Forms 1095-C. Form 1095-C reports details about each full-time employee’s health coverage offer and enrollment to the IRS and the employee.

Employee Considerations in Large Group Plans

Large group health plans provide employees with protections and access to coverage due to the regulatory framework governing these plans. The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows eligible employees and their families to temporarily continue their group health coverage after qualifying events. These events include job loss, reduction in hours, divorce, or the death of the covered employee.

COBRA continuation coverage typically lasts for 18 months following a job loss or reduction in hours. While COBRA allows continuation of the same employer-sponsored benefits, individuals are generally required to pay the entire premium, plus a small administrative fee, which can be up to 102% of the plan’s cost.

The Health Insurance Portability and Accountability Act (HIPAA) offers protections related to health coverage portability. HIPAA limits new group health plans from imposing pre-existing condition exclusions and provides special enrollment opportunities. HIPAA also prohibits discrimination against employees and their dependents based on health status. These provisions aim to facilitate continued access to health coverage and safeguard individual health information.