Small Group vs. Large Group

It is important for employers to understand if they are considered a small group or a large group under the Affordable Care Act (ACA) as it affects the types of plans they are eligible to purchase and if they will be subject to penalties (for companies with 50 or more employees) beginning in 2015.

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For example, while some provisions apply to both small and large groups at renewal, there are several provisions that are tied to the group based upon size. The following provisions will impact small and large groups:

  • Elimination of all pre-existing condition periods.
  • Elimination of waiting periods greater than 90 days.
  • Elimination of annual or lifetime dollar limits on any Essential Health Benefits offered.
  • Limitation of member out-of-pocket expenditures to High Deductible Health Plan limits (For 2015: $6,450 for Individuals and $12,900 for Families).

To determine group size, employers need to calculate the number of Full-Time Equivalent (FTE) employees. The FTE calculation defines full-time as 30-hours or more per week or 120-hours per month. If an employer has 50 or fewer FTE employees, they are eligible for small group products and will be rated as a small group. If they have 51 or more, they are eligible for large group products and will be rated as a large group.

The following types of employees must be included in the calculation, regardless of whether they were covered by CareFirst:

  • The total number of employees in an organizational structure including all employees in the parent, subsidiary, and sibling organizations.
  • All employees, whether full-time (defined as working at least 30-hours per week), part-time (defined as working less than 30 hours per week), or seasonal.
  • All owners, partners, and employees of the company - even if a W-2 was not issued - regardless of whether they have coverage with CareFirst, coverage with another company, or no coverage at all.

Independent contractors, such as subcontractors, who received a 1099, may be counted as employees under the law. The ACA uses the “common law employee” definition which states: anyone who performs services for you is your employee if you can control what will be done and how it will be done.1 The IRS has issued guidance on when individuals could be treated as either an employee or independent contractor. Employers are encouraged to review this guidance and consult with an attorney or accountant, if needed.


1 U.S. Internal Revenue Service. Employee (Common-Law Employee). CareFirst accessed this information on September 29, 2014.

Add up the total hours of service for which the employer pays wages to employees during the year (but not more than 2,080 hours for any employee), and divide that amount by 2,080. If the result is not a whole number, round to the next lowest whole number. (If the result is less than one, however, round up to one FTE.) In some circumstances, an employer with 25 or more employees may qualify for the credit if some of its employees work less than full-time. For example, an employer with 48 employees that are each half-time has 24 FTEs and, therefore may qualify for the credit2.

The specifics of these calculations can be complicated, so be sure to get help from an attorney or tax adviser.


2 U.S. Internal Revenue Service. Determining FTEs and Average Annual Wages. CareFirst accessed this information on October 13, 2017.

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This information is provided for informational purposes only and should not be relied on as legal or tax advice.