How many employees do you need for a group health plan?

This is the question we field more than any other, and the answer surprises most owners: in Florida, Texas and Nevada, you can often get a group health plan with one enrolling employee besides yourself. Sometimes fewer.

The confusion comes from mixing up three different rules that all involve employee counts but mean completely different things.

The three numbers that matter

1 employee — the minimum for a small group plan

Most carriers in FL, TX and NV will write a group with the owner plus one W-2 employee who is not the owner's spouse. Some will write an owner-plus-spouse business as a group of two. A genuine sole proprietor with no W-2 employees generally cannot buy small-group coverage and should be looking at an individual plan or an ICHRA instead.

50 employees — the ACA employer mandate

At 50 or more full-time-equivalent employees, you become an Applicable Large Employer and are required to offer affordable, minimum-value coverage to full-time staff or face penalties. Below 50, offering coverage is optional.

The FTE calculation trips people up. It is not a headcount. You add your full-time employees (30+ hours/week) to the aggregated part-time hours divided by 120. A business with 30 full-timers and 40 half-timers is at roughly 50 FTEs — over the line despite feeling smaller.

25 employees — the tax credit ceiling

The Small Business Health Care Tax Credit is available to employers with fewer than 25 FTEs, average annual wages under an inflation-adjusted cap, who contribute at least 50% of employee-only premium and buy SHOP-certified coverage. It is worth up to 50% of premiums for up to two consecutive years.

The rule that actually blocks people

Headcount is rarely what stops a small business from getting covered. Participation is.

Carriers typically require 70–75% of eligible employees to enroll. If you have 10 eligible employees and only 5 sign up, you may fail — regardless of how many people you employ.

The good news is that valid waivers do not count against you. An employee covered under a spouse's plan, on Medicare, on Medicaid, or on TRICARE is removed from the denominator. In practice this rescues a lot of groups that assumed they had failed. You need documented waivers, which is exactly the sort of admin a broker should be handling for you.

The annual escape hatch

All three states we work in have a small-group open enrollment window from roughly 15 November to 15 December for January 1 effective dates. During this window carriers waive participation and contribution minimums.

If you have been told you do not qualify at any other point in the year, this is frequently the way in. It is also the single most under-used option in small business benefits, because most owners are never told it exists.

What about 1099 contractors?

Contractors cannot be counted toward group eligibility and generally cannot be enrolled on a group plan. This catches out a lot of med spas, construction firms, and creative agencies whose teams are largely 1099.

You are not out of options. An ICHRA can be offered to a class of workers, individual plans can be arranged, and in some cases reclassifying genuinely misclassified workers as W-2 is both the legally correct move and the one that unlocks coverage. That is a conversation for your accountant and us together.