Q: What’s the Difference Between Small Group and Large Group Health Insurance?

Group health insurance comes in two different sizes: small and large. Now, the definitions of the two aren’t so straightforward, as states have different definitions for small group and large group health insurance. 

  • Most states define small group as 1-50 employees, and anything above that is large.
  • Other states draw that line at 100 employees, and anything above is considered large. Currently, California, Colorado, New York, and Vermont follow this definition. 

The difference between the two is important because your prices and regulations change based on the categorization of your group.

For small group insurance, the Affordable Care Act (ACA) has rules about which factors can and cannot impact rates. In short, small group insurance rates can only be based on the location of the business, the ages of enrollees, and in some cases, tobacco usage among enrollees. More factors are allowed to be considered in calculating large group insurance rates.

The other main difference is price. 

If you purchase small group coverage, the price is the same for every employer. You can choose any broker because no matter who your broker is, you’re going to end up with the same prices for the same plans.

In contrast, prices aren’t set with large group coverage and your broker can help negotiate prices down for you. In this case, who your broker is can make a difference in the amount you pay and the plans you select.

Since this can get pretty tricky, chat with a broker to make sure you understand your state’s laws and have them help you choose the right health insurance plan for your business.


  • Christine Loucks

    Is it true that in the state of Michigan, if your company is family owned and operated, fewer than 50 people and the officers are also family members that the company can’t offer group health insurance to the employees? We are a S corp and have 2 employees that would need health insurance. We were told several years ago that because of the number of employees the company wasn’t eligible for small group health insurance.

    • Gusto Editors

      Hi Christine, we see you’re a current Gusto customer. Please reach out to our benefits team at 800-683-8526 and they’ll be able to answer your question there!


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